Annual report pursuant to Section 13 and 15(d)

COMMON STOCK AND PREFERRED STOCK

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COMMON STOCK AND PREFERRED STOCK
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Note 4 - COMMON STOCK AND PREFERRED STOCK

Common Stock

 

The Company is authorized to issue up to 600,000,000 shares of common stock and as of December 31, 2018 had 50,864,131 shares of common stock outstanding.

 

Preferred Stock

 

The Company is authorized to issue up to 10,000,000 shares of undesignated preferred stock, and as of December 31, 2018 had no shares of preferred stock outstanding.

 

Stock Issuances

 

During the twelve month period ended December 31, 2018, the Company issued 9,265,801 shares of common stock for cash proceeds of $2,649,000. The Company also issued 3,400,000 shares of common stock for the purchase of all of the outstanding common stock of Electro-Fish Media (See Note 12). The Company also issued 340,525 shares of common stock as compensation to certain directors and vendors for services performed. The Company also issued 5,287,161 shares of restricted common stock as compensation to certain executives and directors for services performed, of which 3,539,607 shares have vested.

 

During the six month period ended December 31, 2017, the Company issued 2,344,222 shares of common stock for cash proceeds of $1,010,000. The Company also issued 1,940,000 shares of common stock for the purchase of certain assets of ICDLogic, LLC (See Note 12). The Company also issued 2,500,000 restricted shares of common stock as compensation to certain employees as part of the 2016 Long Term Employee Compensation Plan, of which 2,079,834 shares have vested.

 

For the fiscal year ended June 30, 2017, the Company did not have any sales of Common Stock, but did issue 2,005 shares of Common Stock for compensation with a value of $10,000. (See Note 13 with respect to the recapitalization of the Company.)

 

Stock Options

 

Certain executives have been granted options or warrants outside of an employee option plan that are compensatory in nature. A summary of option activity for the twelve month period ended December 31, 2018, the six month period ended December 31, 2017 and the twelve month period ended June 30, 2017 are presented below:

 

                Weighted        
          Weighted     Average        
          Average     Remaining     Aggregate  
    Number     Exercise     Contractual     Intrinsic  
Options Outstanding   of Options     Price     Term in Years     Value  
                         
Balance outstanding - July 1, 2016     296,677     $ 10.40       1.8     $ -  
Granted     -             -          
Exercised     -             -          
Forfeited/expired     (42,118 )           -          
Balance outstanding - June 30, 2017     254,559     $ 10.40       1.0     $ -  
                                 
Exercisable - June 30, 2017     205,889     $ 12.47       0.9     $ -  
                                 
Balance outstanding - July 1, 2017     254,559     $ 10.40       1.0     $ -  
Granted     -             -          
Exercised     -             -          
Forfeited/expired     (56,157 )   $ 11.51       -          
Balance outstanding - December 31, 2017     198,402     $ 10.40       0.8     $ -  
                                 
Exercisable - December 31, 2017     179,683     $ 7.81       0.7     $ -  
                                 
Outstanding - January 1, 2018     198,402     $ 10.40       0.7     $ -  
                                 
Granted     1,300,000     $ 0.25       10.2     $ -  
Exercised     -                          
Forfeited/expired     (142,245 )   $ 9.05                  
Outstanding - December 31, 2018     1,356,157     $ 0.31       9.8     $ -  
                                 
Exercisable - December 31, 2018     489,490     $ 0.29       9.1     $ -  

                                                                     

                Weighted  
           Weighted       Average  
          Average     Remaining  
    Number of     grant date     Years  
Nonvested Options   Options     Fair Value     to vest  
                   
Nonvested - July 1, 2016     118,632     $ 10.40     1.5  
Granted     -     $ -        
Vested     (27,844 )   $ 10.57        
Forfeited/expired     (42,118 )   $ -        
Nonvested - June 30, 2017     48,670     $ 10.40       0.9  
                         
Nonvested - June 30, 2017     48,670     $ -          
Granted     -     $ -          
Vested     (18,719 )   $ 4.37          
Forfeited/expired     (11,232 )   $ -          
Nonvested - January 1, 2018     18,719     $ 10.40       0.7  
                         
Granted     1,300,000     $ 0.13          
Vested     452,052     $ 0.31          
Forfeited/expired     -                  
Nonvested - December 31, 2018     866,667     $ 0.13       1.6  

 

Future compensation related to nonvested awards expected to vest of $143,000 is estimated to be recognized over the weighted average vesting period of approximately 1.6 years.

 

Restricted Stock for Services

 

On April 1, 2018, the Company reached an agreement with a Director of the Company, to issue 1,000,000 shares of restricted common stock as a retainer for future merger and acquisition services. The terms of the agreement include a vesting schedule through May 15, 2020, as defined.

 

On May 22, 2018, the Company’s Board of Directors approved the grant of 4,287,161 shares of restricted common stock to management, for services rendered, of which 2,858,107 shares vested upon issuance and 1,429,054 shares will vest ratably through May 22, 2020. Compensation expense of approximately $360,000 will be recognized in future periods, related to this grant of restricted common stock.

 

On November 3, 2017, our Board of Directors authorized the issuance of 2,500,000 restricted shares of common stock to directors of the Company and certain employees according to the terms of the 2016 Employee Long-Term Incentive Compensation Plan. 1,731,667 restricted shares of common stock vested on the date of Board of Director approval, with all other shares to vest as follows: 33% on the date of Board of Director approval, with 33% on each of the next two anniversary dates of the Board of Director approval. Compensation expense related to these grants for the twelve month period ended December 31, 2018 was $96,000 based on the estimated fair value of our common stock of $0.25 per share. Of the 2,500,000 restricted shares of common stock authorized on November 3, 2017, there were 2,079,833 vested, 348,167 shares unvested and 72,000 shares forfeited, as of December 31, 2018. Compensation expense of approximately $96,000 will be recognized in future periods, related to this grant of restricted shares of common stock.

 

Warrants

 

Warrants to purchase shares of common stock were issued during the twelve month period ended December 31, 2018, the six month period ended December 31, 2017 and the twelve month period ended June 30, 2017, in conjunction with the issuance of common stock.

 

During the twelve month period ended December 31, 2018, warrants to purchase shares of common stock were issued in conjunction with the issuance of shares of common stock. During the twelve month period ended December 31, 2018, the Company issued 4,002,646 warrants related to subscriptions of common stock with an exercise price of $1.35 per share that will expire on June 30, 2020. During the twelve month period ended December 31, 2018, no warrants were exercised and 72,668 expired.

 

Warrants to purchase shares of common stock were issued during the six month period ended December 31, 2017 and the fiscal year ending June 30, 2017, in conjunction with the issuance of common stock, bridge loan financings and for the settlement of a disputed note payable. During the six month period ended December 31, 2017, the Company issued 1,009,900 warrants related to subscriptions of common stock with an exercise price of $1.35 per share that will expire on June 30, 2020. During the fiscal year ended June 30, 2017, the Company settled a dispute with a former employee for an outstanding note payable and warrants issued related to debt. The terms of the settlement agreement included the issuance of 28,078 warrants with an exercise price of $1.35 per share that will expire on June 30, 2020. The Company issued warrants to Bridge Loan investors of 2,253,426 for the fiscal year ended June 30, 2017. During the six month period ended December 31, 2017 and the fiscal year ended June 30, 2017, no warrants were exercised and 35,259 warrants expired.

 

The warrants issued by the Company contain a provision that allows the Company to redeem any or all outstanding and unexercised Warrants at a redemption price of $0.001 per Warrant upon fourteen (14) days’ written notice in the event (i) a Registration Statement registering for sale under the Securities Act of 1933, as amended (the “Act”), the shares of the Company’s Common Stock issuable upon exercise of this Warrant, has been filed with the Securities and Exchange Commission and is in effect on the date of written notice and the redemption date contained therein, (ii) there exists on the date of written notice a public trading market for the Company’s Common Stock and such shares are listed for quotation on the NASDAQ Stock Market or OTC Electronic Bulletin Board, (iii) the public trading price of the Company’s Common Stock has equaled or exceeded 150% of the Exercise Price, as then in effect, for twenty (20) of the preceding thirty (30) Trading Days immediately preceding the date of such notice and (iv) the average daily trading volume during such period has been at least 50,000 shares. The holders of the Warrants called for redemption shall have the right to exercise the Warrants until the close of business on the date next preceding the date fixed for redemption.

 

          Weighted  
          Average  
    Warrants     Exercise Price  
             
Outstanding at July 1, 2016     4,386,858     $ 1.32  
Issued     2,281,504     $ 1.35  
Exercised     -          
Expired     (35,259 )        
Outstanding at June 30, 2017     6,633,103     $ 1.33  
Issued     1,009,900     $ 1.35  
Exercised     -          
Expired     -          
                 
Outstanding at December 31, 2017     7,643,003     $ 1.34  
                 
Issued     4,002,646     $ 1.35  
Exercised     -          
Expired     (72,668 )        
Outstanding at December 31, 2018     11,572,980     $ 1.35