|3 Months Ended|
Mar. 31, 2020
|Subsequent Events [Abstract]|
Note 9. Subsequent Events
Issuance of Shares Pursuant to Conversion of Series A Preferred Stock
During April 2020, fifteen Series A Preferred stockholders converted an aggregate of 396,695 shares of Series A Preferred Stock into 1,043,935 shares of common stock.
During May 2020, three Series A Preferred stockholders converted an aggregate of 19,500 shares of Series A Preferred Stock into 51,316 shares of common stock.
Issuance of Shares Pursuant to Cashless Exercises of Common Stock Warrants
During April 2020, thirteen holders of common stock warrants exercised an aggregate of 520,925 warrants using a cashless exercise into 352,488 shares of common stock.
During May 2020, four holders of common stock warrants exercised an aggregate of 56,982 warrants using a cashless exercise into 26,034 shares of common stock.
Issuance of Shares Pursuant to Exercises of Common Stock Warrants
On April 14, 2020, a holder of common stock warrants exercised 7,000 warrants for a cash payment of $38,570.
Issuance of Shares Pursuant to Cashless Exercises of Stock Options
During April 2020, five holders of common stock options exercised an aggregate of 108,978 options using a cashless exercise into 26,361 shares of common stock.
Issuance of Shares Pursuant to Settlement of Accounts Payable
On April 16, 2020, the Company issued 100,000 shares of common stock in full settlement of $640,517 of accounts payable.
On May 12, 2020, the Company issued 104,567 shares of common stock in full settlement of $93,150 of accounts payable.
Issuance of Shares Pursuant to Stock Compensation
On April 15, 2020, the Company issued 3,913 shares of common stock to a consultant of the Company as stock compensation.
On April 16, 2020, the Company issued 5,264 shares of common stock to a consultant of the Company as stock compensation.
On April 21, 2020, the Company issued 30,303 shares of common stock to an employee pursuant to a vesting schedule.
Issuance of Restricted Stock Units
On April 7, 2020, the Company granted 1,569,000 restricted stock units to 36 individuals for services rendered. Such shares vest in between six months and two years from the date of grant.
On April 7, 2020, the Company granted 329,000 restricted stock units to its Chief Executive Officer. 50% of such shares vested upon the Company filing its 2019 Form 10-K and the remaining 50% vest upon the Company filing its 2020 Form 10-K.
On May 15, 2020, the Company granted 20,000 restricted stock units to three of the four members of the Board of Directors. The fourth member, in connection with his appointment to the board on May 15, 2020, was granted 100,000 restricted stock units. The total amount of 160,000 restricted stock units granted by the Company vest fully on September 17, 2020.
Supply Agreement for COVID-19 Rapid Test Kits
On April 29, 2020, the Company entered into a Supply Agreement (“Supply Agreement”) pursuant to which the Company agreed to purchase an aggregate of 500,000 COVID-19 IGG/IGM Rapid Testing Units (“COVID-19 Test Kits”). The Supply Agreement requires the Company to pay 50% of the total of each order at the time of order placement, with the remaining 50% due upon completion of production (goods ready for shipment). To date, the Company has received approximately 46,500 COVID-19 Test Kits. On June 30, 2020, the supplier notified the Company that it was terminating the Supply Agreement.
Securities Class Action and Investigations
On April 29, 2020, a securities class action case was filed in the United States District Court for the Southern District of New York against the Company and its CEO. The action is captioned Daniel Yannes, individually and on behalf of all others similarly situated, Plaintiff vs. SCWorx Corp. and Marc S. Schessel, Defendants.
On May 27, 2020, a second securities class was filed in the United States District Court for the Southern District of New York against the Company and its CEO. The action is captioned Caitlin Leeburn, individually and on behalf of all others similarly situated, Plaintiff v. SCWorx Corp. and Marc S. Schessel, Defendants.
In connection with these actions, the Company may be obligated to indemnify its CEO and any of its officers or directors who incur any liability or expense incurred as a result of serving at the Company’s request in such capacity.
In addition, following the April 13, 2020 press release and related disclosures (related to COVID-19 rapid test kits), the Securities and Exchange Commission made an inquiry regarding the disclosures the Company made in relation to the transaction involving COVID-19 test kits. On April 22, 2020, the Securities and Exchange Commission ordered that trading in the securities of the Company be suspended because of “questions and concerns regarding the adequacy and accuracy of publicly available information in the marketplace” (the “SEC Trading Halt”). The SEC Trading Halt expired May 5, 2020, at 11:59 PM EDT. The Company is fully cooperating with the SEC’s investigation and is providing documents and other requested information.
In April 2020, the Company received related inquiries from The Nasdaq Stock Market and the Financial Industry Regulatory Authority (FINRA). The Company has been fully cooperating with these agencies and providing information and documents, as requested. On May 5, 2020, the Nasdaq Stock Market informed the Company that it had initiated a “T12 trading halt,” which means the halt will remain in place until the Company has fully satisfied Nasdaq’s request for additional information. The Company continues to fully cooperate with Nasdaq and respond to Nasdaq’s information requests as they are issued. The T12 trading halt remains in effect as of the filing of this Form 10-Q.
Also in April 2020, the Company was contacted by the U.S. Attorney’s Office for the District of New Jersey, which is seeking information and documents from the Company’s officers and directors relating primarily to the April 13, 2020 press release concerning COVID-19 rapid test kits. The Company is fully cooperating with the U.S. Attorney’s Office in its investigation.
During May 2020, the Company received $515,000 in connection with an equity financing. This transaction is subject to execution of definitive documents.
Receipt of CARES funding
On May 5, 2020, the Company obtained a $293,972 unsecured loan payable through the Paycheck Protection Program (“PPP”), which was enacted as part of the Coronavirus Aid, Relief and Economic Security Act (the “CARES ACT”). The funds were received from Bank of America through a loan agreement pursuant to the CARES Act. The CARES Act was established in order to enable small businesses to pay employees during the economic slowdown caused by COVID-19 by providing forgivable loans to qualifying businesses for up to 2.5 times their average monthly payroll costs. The amount borrowed under the CARES Act and used for payroll costs, rent, mortgage interest, and utility costs during the 24 week period after the date of loan disbursement is eligible to be forgiven provided that (a) the Company uses the PPP Funds during the eight week period after receipt thereof, and (b) the PPP Funds are only used to cover payroll costs (including benefits), rent, mortgage interest, and utility costs. While the full loan amount may be forgiven, the amount of loan forgiveness will be reduced if, among other reasons, the Company does not maintain staffing or payroll levels or less than 60% of the loan proceeds are used for payroll costs. Principal and interest payments on any unforgiven portion of the PPP Funds (the “PPP Loan”) will be deferred to the date the SBA remits the borrower’s loan forgiveness amount to the lender or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness period for six months and will accrue interest at a fixed annual rate of 1.0% and carry a two year maturity date. There is no prepayment penalty on the CARES Act Loan.
The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef