Subsequent Events

3 Months Ended

Mar. 31, 2020

Subsequent Events [Abstract]

Subsequent Events

Note 11 – Subsequent Events

Preferred C Share Conversions

The Series C Preferred Stock has anti-dilution protection in the event there is a subsequent equity offering at a price that is less than $0.54.  The Series E Convertible Preferred Stock (the “Preferred Stock”) issued in the offering described below has a $0.25 conversion price that triggered the Series C anti-dilution protection. 

As a result, on April 7, 2020, upon the consummation of the Preferred Stock offering, the initial conversion price of the Series C Preferred Stock was adjusted from $0.54 per share to $0.25 per share, which resulted in a total of 14,747,984 shares of common stock being issuable upon conversion of the remaining Series C Preferred Stock. During the months of April and May 2020, Alpha Capital Anstalt converted 3,312 shares of Series C Preferred Stock into 14,747,984 shares of common stock at a conversion price of $0.25.

Warrant Conversions

During the month of April 2020, Alpha Capital Anstalt converted 3,703,703 warrants into 2,497,739 shares of common stock at a conversion price of $0.25.

Securities Purchase Agreement Entered in April

On April 7, 2020, the Company entered into a Securities Purchase Agreement (the “Agreement”) with Alpha Capital Anstalt (“Alpha”). Pursuant to the terms of the Agreement, the Board of Directors of the Company (the “Board”) authorized 1,050 shares of a newly designated series of preferred stock, the Series E Convertible Preferred Stock (the “Preferred Stock”). The Preferred Stock is convertible at $0.25 per share into an aggregate of 4,200,000 shares of the common stock, par value $0.001 per share (the “Conversion Shares”). The purchase price for the Preferred Stock was $1,050,000 (the “Purchase Price”). The Company also entered into a Registration Rights Agreement, granting registration rights to the Purchaser with respect to the Conversion Shares and common stock underlying warrants currently owned by the Purchaser (the “Warrant Shares”).

Registration Rights

Pursuant to the terms of the Registration Rights Agreement, the Company was obligated to file an initial registration statement registering the Conversion Shares and the Warrant Shares (the “Registrable Securities”), no later than the 15^th calendar day following the date the Company files its Annual Report on Form 10-K for the year ending December 31, 2019 (the “Filing Date”) and, with respect to any additional registration statements the earliest practical date on which the Company is permitted by SEC Guidance to file such additional registration statement related to the Registrable Securities. The Company was obligated to have the registration statement declared effective with the Securities and Exchange Commission (the “Commission”), no later than the 90^th calendar day following the Filing Date, or, in the event of a “full review” by the Commission, the 120^th calendar day following the Filing Date.

The Company would be required to pay to Alpha an amount in cash, as partial liquidated damages and not as a penalty, equal to the product of 1.0% multiplied by the Purchase Price for failure to file the registration statement or have the registration statement declared effective by the dates set forth above. The parties agree that the maximum aggregate liquidated damages payable to Alpha shall be 6.0% of the Purchase Price paid by the Alpha pursuant to the Agreement. If the Company failed to pay any partial liquidated damages in full within seven days after the date payable, the Company will pay interest thereon at a rate of 18% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to Alpha, accruing daily from the date such partial liquidated damages are due until such amounts, plus all such interest thereon, are paid in full.

Leak-Out Agreement

On April 7, 2020, as a condition to the consummation of the Agreement, the Company entered into a Leak-Out Agreement with Mr. Bret Chilcott, a director and the President of the Company, and Alpha with respect to the shares Mr. Chilcott beneficially owns. The restriction on the disposition of the shares is for a period of seven months from the date of the closing of the Agreement. Thereafter, for a period of an additional six months, Mr. Chilcott may sell no more than $25,000 per calendar month of shares of Company common stock.

Amendment to the Articles of Incorporation

On April 2, 2020, the Company’s Board authorized 1,050 shares of the Preferred Stock. The Preferred Stock is convertible at $0.25 per share into an aggregate of 4,200,000 shares of the common stock. The Preferred Stock has liquidation rights senior to the common stock, but pari passu with the Series C Preferred Stock and the Series D Preferred Stock. The Preferred Stock has no voting rights. The conversion price adjusts for stock splits and combinations and is subject to anti-dilution protection for subsequent equity issuances until such time as no shares of Series E Preferred Stock are outstanding. The Certificate of Designation of the Series E Convertible Preferred Stock was filed with the State of Nevada on April 2, 2020.

Filing of Registration Statement

Pursuant to the terms of the Registration Rights Agreement executed on April 7, 2020, the Company filed an initial registration statement registering the Conversion Shares and the Warrant Shares on April 27, 2020. The Company’s registration statement was declared effective May 6, 2020.

Approval of Compensation by Compensation Committee

As announced on March 12, 2020, Mr. Barrett Mooney and Mr. Brett Chilcott resigned from their current roles, effective on May 5, 2020. Mr. Mooney now serves as Chairman of the Board, and Mr. Chilcott no longer serves in management of the Company.

At the time of the announcement, the Compensation Committee of the Board of Directors and each of Messrs. Mooney and Chilcott were in discussions about compensation prior to the effective date of their resignation and thereafter.

On April 16, 2020 the Compensation Committee agreed to the following terms:

Mr. Barrett Mooney:

● March 6, 2020 through April 4, 2020 current salary and benefits;

● $50,000 in cash. $25,000 of which was paid in a lump sum in April 2020, and the balance will be paid in equal installments over a six month period beginning on May 5, 2020;

● Will remain eligible for bonuses of up to $15,000 as approved by the Board based upon certain revenue and operational targets;

● Commencing May 5, 2020 in his role as Chairman, will receive (i) a quarterly grant of 16,500 stock options at the fair market value of the stock on the issuance date vesting over two years and exercisable for a period of five years and (ii) reimbursement for travel expenses; and

● Will provide consulting services, as needed, at a fixed fee of $4,500 per month on a month-to-month basis plus reimbursement for travel expenses.

Mr. Bret Chilcott:

● From May 5, 2020 through May 4, 2021, salary of $140,000 and benefits; and

● After May 4, 2021, for a period of 12 months, will provide consulting services, as needed, at a fixed fee of $4,500 per month on a month-to-month basis plus reimbursement for travel expenses.

2020 Executive Compensation Plan

The Compensation Committee also approved a 2020 Executive Compensation Plan for Nicole Fernandez-McGovern, the Chief Financial Officer and EVP of Operations, and the Chief Executive Officer to be hired. The Plan is as follows, with the Cash Bonus, Option and Restricted Stock Units (RSUs) components to be dependent upon achieving certain to-be-determined financial and operational milestones:

	Chief Executive Officer		Chief Financial Officer/ EVP of Operations
Annual Salary	$	250,000	$	200,000
Cash Bonus	$	50,000	$	30,000
Stock Options (Quarterly Grants)		15,000		15,000
RSUs		150,000		125,000

Appointment of Chief Executive Officer and Compensatory Arrangements

On April 28, 2020, the Company extended an offer of employment that was accepted by Mr. Michael Drozd to serve as the Company’s new Chief Executive Officer. Mr. Drozd will join the Company on or before June 1, 2020. The Company previously announced that Mr. Barrett Mooney would resign from his role as Chief Executive Officer effective as of May 5, 2020, but would remain with the Company as Chairman of the Board thereafter. In the event Mr. Drozd joins after May 5, 2020, Ms. Nicole Fernandez-McGovern, the Company’s Chief Financial Officer will act as Interim Chief Executive Officer until Mr. Drozd officially commences his new role on May 18, 2020. Ms. Fernandez-McGovern will not receive any additional compensation for serving as Interim Chief Executive Officer.

From 2015 through 2019, Mr. Drozd served as President of Eurofins AgBio Division, a global business focused primarily on testing for the agriculture sector (seed, plant and animals) with an emphasis on using genetic analysis. From 2014 until 2015, he was Chief Operating Officer of Arbiom, a French biotechnology company where he restructured the organization, materially increasing overall efficiency and improving resource allocations through numerous measured steps and initiatives. Mr. Drozd served as President and CEO of Aseptia/Wright Foods from 2011 through 2014, a leading technology company in shelf-stable food processing and co-packaging.

Mr. Drozd will receive a base salary of $235,000 per year, which shall be subject to annual performance review by the Compensation Committee of the Board and may be revised by the Committee, in its sole discretion. Mr. Drozd is entitled to receive an annual 20% bonus, which may be a mix of cash and stock options, based upon his performance as determined by certain metrics to be established by the Board and Mr. Drozd. He will receive an initial grant of 100,000 restricted stock units under the Company’s 2017 Omnibus Equity Incentive Plan (the “Equity Plan”), which will fully vest after one year of continued employment. Mr. Drozd is eligible to receive a quarterly award of 15,000 non-qualified stock options under the Equity Plan. At the time of issuance, the stock option award agreements will set forth the vesting, exercisability and exercise price of the stock options as of the date of the grants.

On May 5, 2020, the Company announced that Mr. Michael Drozd who has been appointed to replace Mr. Mooney as Chief Executive Officer and will commence in that role on May 18, 2020. Until such time as Mr. Drozd assumes his role as Chief Executive Officer, Ms. Nicole Fernandez-McGovern, the Company’s current Chief Financial Officer, will also serve as Interim Chief Executive Officer, and thereafter, will continue in her role as Chief Financial Officer. Ms. Fernandez-McGovern will not receive any additional compensation for serving as Interim Chief Executive Officer.

Securities Purchase Agreement Entered in May

On May 11, 2020, the Company and Alpha Captial Anstalt entered into a securities purchase agreement (the “Purchase Agreement”) pursuant to which the Company agreed to sell to Alpha Captial Anstalt in a registered direct offering 2,400,000 shares of common stock, par value $0.001, and pre-funded warrants (the “Warrants”) to purchase up to 3,260,377 shares of common stock, for gross proceeds of approximately $6 million. The purchase price for each share of common stock is $1.06 and the purchase price for each Warrant is $1.059. The exercise price for each Warrant is $0.001. Net proceeds from the sale will be used to repurchase 262 shares of the Company’s Series E Preferred Stock, convertible into 1,046,699 shares of common stock, currently held by Alpha Captial Anstalt at a repurchase price of $1.06 per share of common stock. The Company expects to use the balance for working capital and general corporate purposes. The Shares and the Warrants are being offered by the Company pursuant to an effective shelf registration statement on Form S-3 (File No. 333-237860), which was declared effective on May 6, 2020.

Pursuant to the terms of the Purchase Agreement, the Company has agreed to certain restrictions on future stock offerings, including that during the 60-day period following the closing, the Company will not issue (or enter into any agreement to issue) any shares of common stock or common stock equivalents, subject to certain exceptions. The exercise price of the Warrants and the shares of the common stock issuable upon the exercise thereof will be subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Warrants. The Warrants will be exercisable on a “cashless” basis in certain circumstances.