• Filing Date: 2019-02-14
  • Form Type: 10-Q
  • Description: Quarterly report
v3.10.0.1
C. STOCKHOLDERS EQUITY
3 Months Ended
Dec. 31, 2018
Equity [Abstract]  
C. STOCKHOLDERS' EQUITY

Stock options, stock bonuses and compensation granted by the Company as of December 31, 2018 are as follows:

 

Name of Plan   Total Shares Reserved Under Plans     Shares Reserved for Outstanding Options     Shares Issued     Remaining Options/Shares Under Plans  
                         
Incentive Stock Options Plans     138,400       123,558       N/A       385  
Non-Qualified Stock Option Plans     3,387,200       3,034,669       N/A       311,426  
Stock Bonus Plans     783,760       N/A       309,509       474,218  
Stock Compensation Plan     134,000       N/A       118,590       15,410  
Incentive Stock Bonus Plan     640,000       N/A       624,000       16,000  

 

Stock options, stock bonuses and compensation granted by the Company as of September 30, 2018 are as follows:

 

Name of Plan   Total Shares Reserved Under Plans     Shares Reserved for Outstanding Options     Shares Issued     Remaining Options/Shares Under Plans  
                         
Incentive Stock Option Plans     138,400       123,558       N/A       385  
Non-Qualified Stock Option Plans     3,387,200       3,036,569       N/A       309,526  
Bonus Plans     783,760       N/A       297,230       486,497  
Stock Compensation Plan     134,000       N/A       118,590       15,410  
Incentive Stock Bonus Plan     640,000       N/A       624,000       16,000  

 

Stock option activity:

 

    Three Months Ended December 31,  
    2018     2017  
Granted     500       10,300  
Expired     2,400       17,523  
Forfeited     -       809  

 

Stock-Based Compensation Expense

 

    Three months Ended December 31,  
    2018     2017  
Employees   $ 573,660     $ 1,448,098  
Non-employees   $ 238,904     $ 42,342  

 

Employee compensation expense includes the expense related to options issued or vested and restricted stock. Non-employee expense includes the expense related to options and stock issued to consultants expensed over the period of their service contracts. Stock based compensation expense is included in general and administrative expenses on the statements of operations.

 

Warrants and Non-Employee Options

 

The following chart represents the warrants and non-employee options outstanding at December 31, 2018:

 

Warrant Issue Date

Shares Issuable upon Exercise

of Warrants

Exercise Price Expiration Date Reference
Series N 8/18/2008 85,339 $3.00 2/18/2020 *
Series V 5/28/2015 810,127 $19.75 5/28/2020 *
Series UU 6/11/2018 187,562    $2.80 6/11/2020 *
Series W 10/28/2015 688,930 $16.75 10/28/2020 *
Series X 1/13/2016 120,000    $9.25 1/13/2021 *
Series Y 2/15/2016 26,000 $12.00 2/15/2021 *
Series ZZ 5/23/2016 20,000 $13.75 5/18/2021 *
Series BB 8/26/2016 16,000  $13.75 8/22/2021 *
Series Z 5/23/2016 264,000 $13.75 11/23/2021 *
Series FF 12/8/2016 68,048 $3.91 12/1/2021 *
Series CC 12/8/2016 680,480 $5.00 12/8/2021 *
Series HH 2/23/2017 20,000   $3.13 2/16/2022 *
Series AA 8/26/2016 200,000 $13.75 2/22/2022 *
Series JJ 3/14/2017 30,000 $3.13 3/8/2022 *
Series LL 4/30/2017 26,398 $3.59 4/30/2022 *
Series MM 6/22/2017 893,491 $1.86 6/22/2022 *
Series NN 7/24/2017 539,300 $2.52 7/24/2022  *
Series OO 7/31/2017 60,000 $2.52 7/31/2022 *
Series QQ 8/22/2017 3,500 $2.50 8/22/2022 *
Series GG 2/23/2017 200,000 $3.00 8/23/2022 *
Series II 3/14/2017 216,500 $3.00 9/14/2022 *
Series RR 10/30/2017 555,370 $1.65 10/30/2022 *
Series KK 5/3/2017 213,870 $3.04 11/3/2022 *
Series SS 12/19/2017 807,898 $2.09 12/18/2022 2
Series TT 2/5/2018 1,210,827 $2.24 2/5/2023 2
Series PP 8/28/2017 112,500 $2.30 2/28/2023 2
Series WW 7/2/2018 195,000 $1.63 6/28/2023 *
Series VV 7/2/2018 3,900,000 $1.75 1/2/2024 *
Consultants 7/1/16 - 7/28/17 28,000 $2.18-$11.50 6/30/2019- 7/27/2027 3

 

* No current period changes to these warrants

 

1. Derivative Liabilities

 

The table below presents the fair value of the warrant liabilities at the balance sheet dates:

 

   

December 31,

2018

   

September 30,

2018

 
Series S warrants   $ -     $ 33  
Series V warrants     214,104       770,436  
Series W warrants     372,231       999,081  
Series Z warrants     283,646       487,767  
Series ZZ warrants     19,892       34,215  
Series AA warrants     223,255       380,474  
Series BB warrants     16,346       28,456  
Series CC warrants     1,114,118       1,779,724  
Series DD warrants     -       1,249,287  
Series EE warrants     -       1,249,287  
Series FF warrants     119,859       188,921  
Series GG warrants     394,446       607,228  
Series HH warrants     37,865       58,816  
Series II warrants     429,546       660,135  
Series JJ warrants     57,180       88,642  
Series KK warrants     428,835       656,930  
Series LL warrants     49,435       77,632  
Total warrant liabilities   $ 3,760,758     $ 9,317,064  

 

The table below presents the gains / (losses) on the warrant liabilities for the three months ended December 31:

 

    2018      2017  
Series S warrants   $ 33     $ 13,068  
Series V warrants     556,332       (98,313 )
Series W warrants     626,850       (129,467 )
Series Z warrants     204,121       (55,535 )
Series ZZ warrants     14,323       (3,343 )
Series AA warrants     157,219       (47,360 )
Series BB warrants     12,110       (2,631 )
Series CC warrants     665,606       (196,821 )
Series DD warrants     1,249,287       5,483  
Series EE warrants     1,249,287       5,483  
Series FF warrants     69,062       (18,047 )
Series GG warrants     212,782       (115,132 )
Series HH warrants     20,951       (5,662 )
Series II warrants     230,589       (178,806 )
Series JJ warrants     31,462       (8,542 )
Series KK warrants     228,095       (115,027 )
Series LL warrants     28,197       (7,578 )
Net gain (loss) on warrant liabilities   $ 5,556,306     $ (958,230 )

  

The Company reviews all outstanding warrants in accordance with the requirements of ASC 815. This topic provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions. The warrant agreements provide for adjustments to the exercise price for certain dilutive events. Under the provisions of ASC 815, the warrants are not considered indexed to the Company’s stock because future equity offerings or sales of the Company’s stock are not an input to the fair value of a “fixed-for-fixed” option on equity shares, and equity classification is therefore precluded.

 

In accordance with ASC 815, derivative liabilities must be measured at fair value upon issuance and re-valued at the end of each reporting period through expiration. Any change in fair value between the respective reporting dates is recognized as a gain or loss.

 

Expiration of Derivative Liabilities

 

On December 10, 2018, 1,360,960 Series DD and 1,360,960 Series EE warrants, with an exercise price of $4.50 expired.

 

On October 11, 2018, 327,729 Series S warrants, with an exercise price of $31.25 expired.

  

2. Changes in Equity Warrants

 

Exercise of Equity Warrants

 

The following chart lists the warrants that were exercised and the proceeds received during the three months ended December 31, 2018. No warrants were exercised during the three months ended December 31, 2017.

 

Warrants

  Warrants Exercised     Exercise Price       Proceeds  
Series PP     60,000     $ 2.30     $ 138,000  
Series SS     152,632     $ 2.09     $ 319,001  
Series TT     86,050     $ 2.24     $ 192,752  
      298,682             $ 649,753  

 

Expiration of Equity Warrants

 

No equity warrants expired during the three months ended December 31, 2018.

 

3.  Options and Shares Issued to Consultants

 

The Company typically enters into consulting arrangements in exchange for common stock or stock options. During the three months ended December 31, 2018 and 2017, respectively, the Company issued 62,784 and 13,705 shares of restricted common stock. The weighted average grant value of the shares issued to consultants was $3.22 and $1.85 during the three months ended December 31, 2018 and 2017, respectively. The aggregate values of the issuances of restricted common stock and common stock options are recorded as prepaid expenses and are charged to general and administrative expenses over the periods of service.

 

During the three months ended December 31, 2018 and 2017, the Company recorded total expense of approximately $239,000 and $42,000, respectively, relating to these consulting agreements. At December 31, 2018 and September 30, 2018, approximately $171,000 and $207,000, respectively, are included in prepaid expenses. During the three months ended December 31, 2018 and 2017, 2,400 and 2,000 options respectively were issued to consultants as payment for services rendered. As of December 31, 2018, 28,000 options issued to consultants remained outstanding, all of which were issued from the Non-Qualified Stock Option plans and are fully vested.

 

4.  Securities Purchase Agreement

 

Periodically, the Company has entered into Securities Purchase Agreements with Ergomed plc, one of the Company’s Clinical Research Organizations responsible for managing the Company’s Phase 3 clinical trial, to facilitate a partial payment of the amounts due Ergomed. Under the Agreements, the Company issued Ergomed shares of common stock as a forbearance fee in exchange for Ergomed’s agreement to provisionally forbear collection of the payables in an amount equal to the net proceeds from the resales of the shares issued to Ergomed. Upon issuance, the Company expenses the full value of the shares as Other Non-Operating Gain/Loss and subsequently offsets the expense as amounts are realized through the resale by Ergomed and reduces accounts payable to Ergomed. During the quarters ended December 31, 2018 and 2017, respectively, the Company realized approximately $1.2 million and $0.7 million through the resale of 353,995 and 415,208 shares and reduced the payables and credited Other Operating Gain by those amounts.

 

The Security Purchase Agreements expired on December 31, 2018, at which time Ergomed returned all 564,905 unsold shares for cancellation. The par value of those shares was reclassed from Common Stock to Additional Paid -In Capital on the balance sheet. As of January 8, 2019, the Company owed Ergomed, plc for services provided by Ergomed in connection with the Company’s Phase III clinical trial. On January 9, 2019 the Company agreed to issue Ergomed 500,000 restricted shares of the Company’s common stock in payment of the amount the Company owed Ergomed plus future bills payable to Ergomed.