NOTES
TO CONDENSED FINANCIAL STATEMENTS
Three
and Six months Ended June 30, 2020 and 2019 (Unaudited)
(In
thousands, except share and per share amounts)
1.
Basis of Presentation and Liquidity
The
accompanying interim condensed financial statements of Reed’s, Inc. (the “Company”, “we”, “us”,
or “our”), are unaudited, but in the opinion of management contain all adjustments, including normal recurring adjustments,
necessary to present fairly our financial position at June 30, 2020 and the results of operations and cash flows for the three
and six months ended June 30, 2020 and 2019. The balance sheet as of December 31, 2019 is derived from the Company’s audited
financial statements.
Certain
information and footnote disclosures normally included in financial statements that have been prepared in accordance with accounting
principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission regarding interim financial reporting. We believe that the disclosures contained in
these condensed financial statements are adequate to make the information presented herein not misleading. For further information,
refer to the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2019, as filed with the Securities and Exchange Commission on March 18, 2020 and amended on April 8, 2020.
The
results of operations for the six months ended June 30, 2020 are not necessarily indicative of the results of operations to be
expected for the full fiscal year ending December 31, 2020.
COVID-19
Considerations
In
the quarter ended June 30, 2020, the COVID-19 pandemic did not have a material net impact on our operating results. In the future,
the pandemic may cause reduced demand for our products if, for example, the pandemic results in a recessionary economic environment
which negatively effects the consumers who purchase our products. Based on the recent increase in demand for our products, we
believe that over the long term, there will continue to be strong demand for our products.
Our
ability to operate without significant negative operational impact from the COVID-19 pandemic will in part depend on our ability
to protect our employees and our supply chain. The Company has endeavored to follow the recommended actions of government and
health authorities to protect our employees. For the three months ended June 30, 2020, we maintained the consistency of our operations
during the onset of the COVID-19 pandemic. We will continue to innovate in managing our business, coordinating with our employees
and suppliers to do our part in the infection prevention and remain flexible in responding to our customers and suppliers. However,
the uncertainty resulting from the pandemic could result in an unforeseen disruption to our workforce and supply chain (for example
an inability of a key supplier or transportation supplier to source and transport materials) that could negatively impact our
operations.
Through
June 30, 2020, the COVID-19 pandemic has not negatively impacted the Company’s liquidity position as of such date. Shipments
to customers in the second quarter were up 16% from the first quarter of the year. Through June 30, 2020, we continue to generate
cash flows to meet our short-term liquidity needs, and we expect to maintain access to the capital markets. We have also not observed
any material impairments of our assets or a significant change in the fair value of our assets due to the COVID-19 pandemic.
For
additional information on risk factors related to the pandemic or other risks that could impact our results, please refer to “Risk
Factors” in Part II, Item 1A of this Form 10-Q.
Liquidity
The
accompanying financial statements have been prepared under the assumption that the Company will continue as a going concern. Such
assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
For
the six months ended June 30, 2020, the Company recorded a net loss of $4,330
and used cash in operations of $5,028.
As of June 30, 2020, we had a cash balance of $1,112
with borrowing capacity of $6,704,
a stockholder’s equity of $2,866 and
a working capital of $2,257,
compared to a cash balance of $913
with borrowing capacity of $3,235,
stockholders’ equity of $1,147 and
a working capital of $4,885 at
December 31, 2019.
In
April 2020, the Company conducted a public offering of 15,333,334 shares of its common stock at $0.375 per share, resulting in
net proceeds to the Company of $5,310.
On
April 20, 2020, the Company received loan proceeds in the amount of $770
pursuant to the Paycheck Protection Program
under the Coronavirus Aid, Relief and Economic Security Act (the “Cares Act”)
(see Note 8).
Historically,
we have financed our operations through public and private sales of common stock, issuance of preferred and common stock, convertible
debt instruments, term loans and credit lines from financial institutions, and cash generated from operations. We have taken decisive
action to improve our margins, including fully outsourcing our manufacturing process, streamlining our product portfolio, negotiating
improved vendor contracts and restructuring our selling prices.
2.
Significant Accounting Policies
Use
of estimates
The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. Those estimates and assumptions include estimates for reserves of uncollectible accounts, inventory
obsolescence, depreciable lives of property and equipment, analysis of impairments of recorded long-term tangible and intangible
assets, realization of deferred tax assets, accruals for potential liabilities and assumptions made in valuing stock instruments
issued for services.
Revenue
Recognition
The
Company recognizes revenue in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606), (“ASC 606”).
The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount
expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms
of contract(s), which include (1) identifying the contract or agreement with a customer, (2) identifying our performance obligations
in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance
obligations, and (5) recognizing revenue as each performance obligation is satisfied.
The
Company does not have any significant contracts with customers requiring performance beyond delivery, and contracts with customers
contain no incentives or discounts that could cause revenue to be allocated or adjusted over time. Shipping and handling activities
are performed before the customer obtains control of the goods and therefore represent a fulfillment activity rather than a promised
service to the customer. Revenue and costs of sales are recognized when control of the products transfers to our customer, which
generally occurs upon shipment from our facilities. The Company’s performance obligations are satisfied at that time.
All
of the Company’s products are offered for sale as finished goods only, and there are no performance obligations required
post-shipment for customers to derive the expected value from them.
The
Company does not allow for returns, except for damaged products when the damage occurred pre-fulfillment. Damaged product returns
have historically been insignificant. Because of this, the stand-alone nature of our products, and our assessment of performance
obligations and transaction pricing for our sales contracts, we do not currently maintain a contract asset or liability balance
for obligations. We assess our contracts and the reasonableness of our conclusions on a quarterly basis.
Loss
per Common Share
Basic
earnings (loss) per share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average
number of shares of common stock outstanding during the period. Diluted earnings (loss) per share is computed by dividing the
net income applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional
common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock
method. Potential common shares are excluded from the computation when their effect is antidilutive.
For
the periods ended June 30, 2020 and 2019, the calculations of basic and diluted loss per share are the same because potential
dilutive securities would have had an anti-dilutive effect. The potentially dilutive securities consisted of the following:
Schedule of Potentially Dilutive Securities
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
|
Convertible note to a related party
|
|
|
2,266,667
|
|
|
|
2,266,667
|
|
|
Warrants
|
|
|
6,413,782
|
|
|
|
6,620,282
|
|
|
Common stock equivalent of Series A Convertible Preferred stock
|
|
|
37,644
|
|
|
|
37,644
|
|
|
Common stock issuable
|
|
|
350,000
|
|
|
|
-
|
|
|
Unvested restricted common stock
|
|
|
150,000
|
|
|
|
614,514
|
|
|
Options
|
|
|
4,777,907
|
|
|
|
4,365,566
|
|
|
Total
|
|
|
13,996,000
|
|
|
|
13,904,673
|
|
The
Series A Convertible Preferred Stock is convertible into Common shares at the rate of 1:4.
Stock
Compensation Expense
The
Company periodically issues stock options and restricted stock awards to employees and non-employees in non-capital raising transactions
for services and for financing costs. The Company accounts for such grants issued and vesting based on ASC 718, whereby the value
of the award is measured on the date of grant and recognized as compensation expense on the straight-line basis over the vesting
period. The Company recognizes the fair value of stock-based compensation within its Statements of Operations with classification
depending on the nature of the services rendered.
The
fair value of the Company’s stock options is estimated using the Black-Scholes-Merton Option Pricing model, which uses certain
assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or restricted stock,
and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton Option Pricing
model and based on actual experience. The assumptions used in the Black-Scholes-Merton Option Pricing model could materially affect
compensation expense recorded in future periods.
Advertising
Costs
Advertising
costs are expensed as incurred and are included in selling and marketing expense. Advertising costs for the three months ended
June 30, 2020 and 2019, aggregated $303 and $1,227, respectively. Advertising costs for the six months ended June 30, 2020 and
2019, aggregated $606 and $1,533, respectively.
Concentrations
Gross
sales. During the three months ended June 30, 2020, two customers accounted for 26% and 13% of gross sales, respectively,
and during the six months ended June 30, 2020, two customers accounted for 25% and 14% of gross sales, respectively. During the
three months ended June 30, 2019, two customers accounted for 29% and 14% of gross sales, respectively, and during the six months
ended June 30, 2019, two customers accounted for 28% and 12% of gross sales, respectively. No other customers exceeded 10% of
sales in either period.
Accounts
receivable. As of June 30, 2020, the Company had accounts receivable from one customer which comprised 23% of its gross accounts
receivable. As of December 31, 2019, the Company had accounts receivable from one customer which comprised 14% of its gross accounts
receivable.
Purchases
from vendors. During the three months ended June 30, 2020, no vendor exceeded 10% of all purchases. During the six months
ended June 30, 2020, one vendor accounted for 11% of all purchases. During the three months ended June 30, 2019, each of the Company’s
two largest vendors accounted for approximately 10% of all purchases. During the six months ended June 30, 2019, one vendor accounted
for 13% of all purchases and another accounted for 10% of all purchases. No other vendors exceeded 10% of all purchases in either
period.
Accounts
payable. As of June 30, 2020, of the Company’s three largest vendors, two each accounted for 12%,of the total accounts
payable and the third, 11%. As of December 31, 2019, of the Company’s largest three vendors, one accounted for 19% of the
total accounts payable, the second, 15%, and the third, 14%.
Fair
Value of Financial Instruments
The
Company uses various inputs in determining the fair value of its financial assets and liabilities and measures these assets on
a recurring basis. Financial assets recorded at fair value are categorized by the level of subjectivity associated with the inputs
used to measure their fair value. ASC 820 defines the following levels of subjectivity associated with the inputs:
Level
1—Quoted prices in active markets for identical assets or liabilities.
Level
2—Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.
Level
3—Unobservable inputs based on the Company’s assumptions.
The
carrying amounts of financial assets and liabilities, such as cash and cash equivalents, accounts receivable, short-term bank
loans, accounts payable, notes payable and other payables, approximate their fair values because of the short maturity of these
instruments. The carrying values of capital lease obligations and long-term financing obligations approximate their fair values
because interest rates on these obligations are based on prevailing market interest rates.
As
of June 30, 2020, and December 31, 2019, the Company’s balance sheets included Level 2 liabilities comprised of the fair
value of warrant liabilities aggregating $15 and $8, respectively (see Note 10).
Recent
Accounting Pronouncements
In
June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires entities to
use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain
types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses.
ASU 2016-13 is effective for the Company beginning January 1, 2023, and early adoption is permitted. The Company does not believe
the potential impact of the new guidance and related codification improvements will be material to its financial position, results
of operations and cash flows.
Other
recent accounting pronouncements issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public
Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on
the Company’s present or future financial statements.
3.
Inventory
Inventory
is valued at the lower of cost (first-in, first-out) or net realizable value, and net of reserves is comprised of the following
(in thousands):
Schedule of Inventory
|
|
|
June
30,
2020
|
|
|
December
31,
2019
|
|
|
Raw materials and packaging
|
|
$
|
4,576
|
|
|
$
|
4,261
|
|
|
Finished products
|
|
|
3,835
|
|
|
|
6,247
|
|
|
Total
|
|
$
|
8,411
|
|
|
$
|
10,508
|
|
The
Company has recorded a reserve for slow moving and potentially obsolete inventory. The reserve at June 30, 2020, and December
31, 2019, was $437 and $646, respectively.
4.
Property and Equipment
Property
and equipment is comprised of the following (in thousands):
Schedule of Property and
Equipment
|
|
|
June
30,
2020
|
|
|
December
31,
2019
|
|
|
Right-of-use assets under
operating leases
|
|
$
|
730
|
|
|
$
|
730
|
|
|
Right-of-use assets under finance leases
|
|
|
66
|
|
|
|
179
|
|
|
Computer hardware and software
|
|
|
637
|
|
|
|
543
|
|
|
Machinery and
equipment
|
|
|
91
|
|
|
|
83
|
|
|
Total cost
|
|
|
1,524
|
|
|
|
1,535
|
|
|
Accumulated depreciation
and amortization
|
|
|
(501
|
)
|
|
|
(482
|
)
|
|
Net book value
|
|
$
|
1,023
|
|
|
$
|
1,053
|
|
Depreciation
expense for the three months ended June 30, 2020 and 2019 was $12 and $12, respectively. Depreciation expense for the six months
then June 30, 2020 and 2019 was $24 and $25, respectively. During the six months ended June 30, 2020, the Company disposed of
right-of-use assets under finance leases with a net book value of $45, and terminated $51 of related finance leases (see Note
9), resulting in a gain on sale of assets of $6.
Equipment
held for sale consists of the following (in thousands):
Schedule of Equipment Held for Sale
|
|
|
June
30,
2020
|
|
|
December
31,
2019
|
|
|
Equipment held for sale
|
|
$
|
163
|
|
|
$
|
163
|
|
|
Reserve
|
|
|
(96
|
)
|
|
|
(96
|
)
|
|
Net book value
|
|
$
|
67
|
|
|
$
|
67
|
|
The
balance as of June 30, 2020, and December 31, 2019, consists of residual manufacturing equipment, at estimated net realizable
value, which management anticipates selling during 2020.
5.
Intangible Assets
Intangible
assets are comprised of brand names acquired, specifically Virgil’s, and costs related to trademarks. They have been assigned
an indefinite life, as we currently anticipate that they will contribute cash flows to the Company perpetually. These indefinite-lived
intangible assets are not amortized but are assessed for impairment annually and evaluated annually to determine whether the indefinite
useful life remains appropriate. We first assess qualitative factors to determine whether it is more likely than not that the
asset is impaired. If further testing is necessary, we compare the estimated fair value of our asset with its book value. If the
carrying amount of the asset exceeds its fair value, as determined by the discounted cash flows expected to be generated by the
asset, an impairment loss is recognized in an amount equal to that excess. Based on management’s measurement, there were
no indications of impairment at June 30, 2020.
Intangible
assets consists of the following (in thousands):
Summary of Intangible Assets
|
|
|
June 30,
2020
|
|
|
December 31,
2019
|
|
|
Brand names
|
|
$
|
576
|
|
|
$
|
576
|
|
|
Trademarks
|
|
|
14
|
|
|
|
-
|
|
|
Total
|
|
$
|
590
|
|
|
$
|
576
|
|
6.
Line of Credit
Amounts
outstanding under the Company’s credit facilities are as follows (in thousands):
Schedule of Amount Outstanding Under Credit Facilities
|
|
|
June
30,
2020
|
|
|
December
31,
2019
|
|
|
Line of Credit
|
|
$
|
2,929
|
|
|
$
|
3,661
|
|
|
Capitalized finance
costs
|
|
|
(291
|
)
|
|
|
(484
|
)
|
|
Net balance
|
|
$
|
2,638
|
|
|
$
|
3,177
|
|
On
October 4, 2018, the Company entered into a financing agreement with Rosenthal & Rosenthal, Inc. The financing agreement provides
a maximum borrowing capacity of $13,000.
Borrowings are based on a formula of eligible accounts receivable and inventories (the “permitted borrowings”) plus
advances (an “over-advance” of up to $4,000)
in excess of permitted borrowings. At June 30, 2020, the unused borrowing capacity under the financing agreement was $6,704.
The line of credit matures on March
30, 2021.
Borrowings
under the Rosenthal financing agreement bear interest at the greater of prime or 4.75%, plus an additional 2% to 3.5% depending
on whether the borrowing is based upon receivables, inventory or is an over-advance. The effective interest rate as of June
30, 2020 on outstanding borrowings was 6.8%. Additionally, the line of credit is subject to monthly facility and administration
fees, and aggregate minimum monthly fees (including interest) of $4.
The line of credit is secured by substantially
all of the assets excluding intellectual property of the Company. The over-advance is secured by all of Reed’s intellectual
property collateral. Additionally, any over-advance is guaranteed by an irrevocable stand-by letter of credit in the amount of
$1,500, issued by Daniel J. Doherty III and the Daniel J. Doherty, III 2002 Family Trust, affiliates of Raptor/Harbor Reeds SPV
LLC (“Raptor”). As of June 30, 2020, Raptor beneficially owns 11.6% of the Company’s outstanding common stock
and Mr. Doherty is a member of the Company’s Board of Directors. In the event of a default under the financing agreement,
Raptor has a put option to purchase from Rosenthal the entire amount of any outstanding over-advance plus accrued interest, prior
to Rosenthal declaring an event of default under the financing agreement.
The
financing agreement with Rosenthal includes customary restrictions that limit our ability to engage in certain types of transactions,
including our ability to utilize tangible and intangible assets as collateral for other indebtedness. Additionally, the agreement
contains a financial covenant that requires us to meet certain minimum working capital and tangible net worth thresholds as of
the end of each quarter. We were in compliance with the terms of our agreement with Rosenthal as of June 30, 2020.
Amortization
of debt discount was $193 and $150 for the six months ended June 30, 2020 and 2019, respectively.
7.
Convertible Note to a Related Party
The
Convertible Note to a Related Party consists of the following (in thousands):
Schedule of Convertible Notes
|
|
|
June
30,
2020
|
|
|
December
31,
2019
|
|
|
12% Convertible Note Payable
|
|
$
|
3,400
|
|
|
$
|
3,400
|
|
|
Accrued Interest
|
|
|
1,577
|
|
|
|
1,289
|
|
|
Total obligation
|
|
$
|
4,977
|
|
|
$
|
4,689
|
|
On April 21, 2017, the Company issued a secured,
convertible, subordinated, non-redeemable note in the principal amount of $3,400 and warrants to purchase 1,416,667 shares of
common stock to Raptor. Raptor beneficially owned approximately 11.6% and % of the Company’s common stock at
June 30, 2020 and December 31, 2019, respectively.
The Raptor Note bears interest at a rate of
12% per annum, compounded monthly, and is secured by the Company’s assets, subordinate to the first priority security
interest of Rosenthal & Rosenthal (see Note 6). The note may not be prepaid and matures on April 21, 2021. It may be converted,
at any time and from time to time, into shares of common stock of the Company, at a revised conversion price of $1.50.
The warrants expire on April 21, 2022,
and have an adjusted exercise price of $1.50 per share. The note and warrants contain customary anti-dilution
provisions, and the shares of common stock issuable upon conversion of the note and exercise of the warrants have been
registered on Form S-3.
8.
Note Payable
On April 20, 2020, the Company was granted
a loan (the “PPP loan”) from City National Bank in the aggregate amount of $770, pursuant to the Paycheck Protection
Program (the “PPP”) under the CARES Act.
The PPP loan agreement is dated April 20,
2020, matures on April
20, 2022, bears interest at a rate of 1%
per annum, with the first six months of interest deferred, is payable monthly commencing on November 2020, and is unsecured
and guaranteed by the U.S. Small Business Administration. The loan term may be extended to April 20, 2025, if mutually agreed
to by the Company and lender. We applied ASC 470, Debt, to account for the PPP loan. The PPP loan may be prepaid at any
time prior to maturity with no prepayment penalties. Funds from the PPP loan may only be used for qualifying expenses as described
in the CARES Act, including qualifying payroll costs, qualifying group health care benefits, qualifying rent and debt obligations,
and qualifying utilities. The Company intends to use the entire loan amount for qualifying expenses. Under the terms of the PPP,
certain amounts of the loan may be forgiven if they are used for qualifying expenses. The Company intends to apply for forgiveness
of the PPP loan with respect to these qualifying expenses, however, we cannot assure that such forgiveness of any portion of the
PPP loan will occur. As for the potential loan forgiveness, once the PPP loan is, in part or wholly, forgiven and a legal release
is received, the liability would be reduced by the amount forgiven and a gain on extinguishment would be recorded. The terms of
the PPP loan provide for customary events of default including, among other things, payment defaults, breach of representations
and warranties, and insolvency events. The Company was in compliance with the terms of the PPP loan as of June 30, 2020.
9.
Leases Payable
The
Company adopted ASU 2016-02, Leases, effective October 1, 2018. The standard requires a lessee to record a right-of-use asset
and a corresponding lease liability at the inception of the lease, initially measured at the present value of the lease payments.
The Company leases its Norwalk office,
and certain office equipment and automobiles. The Company analyzes all leases at inception to determine if a right-of-use asset
and lease liability should be recognized. Leases with an initial term of 12 months or less are not included on the condensed consolidated
balance sheets. The lease liability is measured at the present value of future lease payments as of the lease commencement date.
ASU
2016-02 requires recognition in the statement of operations of a single lease cost, calculated so that the cost of the lease is
allocated over the lease term, generally on a straight-line basis. During the six months ended June 30, 2020, the Company disposed
of right-of-use assets of $45, and reflected amortization of right of use asset of $62 related to these leases, resulting in a
net asset balance of $590 as of June 30, 2020.
As
of December 31, 2019, liabilities recorded under finance leases and operating leases were $89 and $697, respectively. During the
six months ended June 30, 2020, the Company terminated $51 of finance leases, and made payments of $5 towards finance lease liability
and $13 towards operating lease liability. As of June 30, 2020, liability under finance lease amounted to $33 and liability under
operating lease amounted to $684, of which $56 and $33 were reflected as current due, under finance leases and operating leases,
respectively.
As
of June 30, 2020, the weighted average remaining lease terms for operating lease and finance lease are 4.51 years and 0.50 years,
respectively. The weighted average discount rate for operating lease is 12.6% and 9.0% for finance lease.
10.
Warrant Liability
Various
sales of common stock made by the Company to finance operations have been accompanied by the issuance of warrants. Some of these
warrant agreements contain fundamental transaction provisions which may give rise to an obligation of the Company to pay cash
to the warrant holders. For accounting purposes, in accordance with ASC 480, Distinguishing Liabilities from Equity, those
warrants with fundamental transaction terms are accounted for as liabilities given the terms may give rise to an obligation of
the Company to the warrant holders. These liabilities are measured at fair value at each reporting period and the change in the
fair value is recognized in earnings in the accompanying Statements of Operations.
The
fair value of the warrant liability was determined using the Black-Scholes-Merton option pricing model at June 30, 2020 and December
31, 2019, using the following assumptions:
Schedule of
Warrant Liability Using Assumptions
|
|
|
June 30,
2020
|
|
|
December 31,
2019
|
|
|
|
|
|
|
|
|
|
|
Stock Price
|
|
$
|
0.96
|
|
|
$
|
0.91
|
|
|
Risk free interest rate
|
|
|
1.16%
|
|
|
|
1.95%
|
|
|
Expected volatility
|
|
|
119.25%
|
|
|
|
83.36%
|
|
|
Expected life in years
|
|
|
0.92
|
|
|
|
1.42
|
|
|
Expected dividend yield
|
|
|
0%
|
|
|
|
0%
|
|
|
Number of Warrants containing fundamental
transaction provisions
|
|
|
138,762
|
|
|
|
138,762
|
|
|
Fair Value of Warrants
|
|
$
|
15
|
|
|
$
|
8
|
|
The
risk-free interest rate is based on rates established by the Federal Reserve Bank. The Company uses the historical volatility
of its common stock to estimate its future volatility. The expected life of the warrant is based upon its remaining contractual
life. The expected dividend yield reflects that the Company has not paid dividends to its common stockholders in the past and
does not expect to do so in the foreseeable future.
The
following table sets forth a summary of the changes in the estimated fair value of the warrant liability during the three months
ended June 30, 2020 and 2019:
Schedule of Warrant Liability
|
|
|
June
30,
2020
|
|
|
June
30,
2019
|
|
|
Beginning Balance
|
|
$
|
8
|
|
|
$
|
38
|
|
|
Change in fair
value
|
|
|
7
|
|
|
|
108
|
|
|
Ending balance
|
|
$
|
15
|
|
|
$
|
146
|
|
11.
Common Stock
Common
stock issuance
In
April 2020, the Company conducted a public offering of 15,333,334 shares of its common shares at a public offering price of $0.375
per share. The net proceeds to the Company from this offering are $5,310, after deducting underwriting discounts and commissions
and other offering expenses. Proceeds from the offering will provide capital for working capital, and general corporate purposes.
12.
Share-based payments
Restricted
common stock
The
following table summarizes restricted stock activity during the six months ended June 30, 2020:
Summary of Non-vested Restricted Stock Activity
|
|
|
|
Unvested
Shares
|
|
|
Issuable
Shares
|
|
|
Fair
Value
at Date of
Issuance
|
|
|
Weighted
Average
Grant Date
Fair Value
|
|
|
Balance, December 31,
2019
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
Granted
|
|
|
|
500,000
|
|
|
|
-
|
|
|
|
418
|
|
|
|
0.84
|
|
|
Vested
|
|
|
|
(350,000
|
)
|
|
|
350,000
|
|
|
|
(285
|
)
|
|
|
-
|
|
|
Issued
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Balance,
June 30, 2020
|
|
|
|
150,000
|
|
|
|
350,000
|
|
|
$
|
133
|
|
|
$
|
0.84
|
|
During
the six months ended June 30, 2020, the Company issued 500,000 shares of restricted stock to a director and two executive employees.
350,000 of these shares vested immediately, 75,000 shares will vest in increments of 18,750 each over four years from the date
of grant, and 75,000 shares will vest over four years based on performance criteria determined by the Board of Directors or Compensation
Committee. Unvested shares remain subject to forfeiture if vesting conditions are not met. The aggregate fair value of the stock
awards was $418 based on the market price of our common stock price which ranged from $0.81 to $0.89 per share on the dates of
grants and is amortized as shares vest. The total fair value of restricted common stock vesting during the six months ended June
30, 2020 and 2019 was $285 and $331, respectively, and is included in general and administrative expenses in the accompanying
statements of operations. As of June 30, 2020, the amount of unvested compensation related to issuances of restricted common stock
was $133, which will be recognized as an expense in future periods as the shares vest. When calculating basic loss per share,
these shares are included in weighted average common shares outstanding from the time they vest. When calculating diluted net
income per share, these shares are included in weighted average common shares outstanding as of their grant date.
Stock
options
The
following table summarizes stock option activity during the six months ended June 30, 2020: