GNPX 2017 Annual Report

F-10 Consistent with the stated objectives of the TETF, an event of default that would trigger the repayment obligation under the Promissory Note is our failure to maintain our principal place of business or our principal executive offices headquartered in the State of Texas (referred to as the “Residency Requirement”) until August 13, 2020. Warrant The Warrant is an obligation to issue (a Right to purchase by the TETF) shares of the same class of stock to be issued in a “First Qualifying Financing Transaction,” at 80% of the per share transaction value (effectively a 20% discount). Alternatively, the TETF could exercise its right to purchase at any time prior to the occurrence of a First Qualifying Financial Transaction for $0.001 per share. The Warrant included a provision that required changes in the strike price, driven by the pricing of the “First Qualifying Financing Transaction.” As a result, the Warrants embedded in the Investment Unit were accounted for as a derivative financial instrument and classified outside from equity under ASC 815-40-15 as the settlement adjustment from the future transaction did not permit for the strike price to be considered fixed. On March 12, 2014, the TETF exercised its Right to Purchase for $0.001 per share, and we issued to the TETF an aggregate of 184,797 shares of our Series B preferred stock. Upon completion of the Company’s IPO, the TETF’s shares were converted to Common Stock and forward-split resulting in 1,235,219 shares of Common Stock. Accounting for the Investment Unit We accounted for the Investment Unit as a hybrid financial instrument under FASB Statement 155, and measured the Investment Unit at the amount of proceeds received from the TETF award. The First Qualifying Financial Transaction occurred during December 2013, resulting in an adjustment to the fair value of the Investment Unit in the amount of approximately $2.5 million. The TETF exercised the Warrant for $0.001 per share. We received notice of purchase from the TETF during March 2014, and issued 184,797 shares of series B Preferred Stock, which has since been converted to 1,235,219 shares of Common Stock upon completion of the Company’s IPO. Upon exercise by the TETF of the Warrant, the remaining component within the Investment Unit was the Promissory Note. The Investment Unit was valued at zero, because our obligation to repay the Promissory Note arises from an event of default (a failure to maintain the Texas Residency Requirement), which is an event which rests entirely within our control. Note 5 – Equity Stock Issuances During the year ended December 31, 2017, we issued (i) 207,206 shares of Common Stock, taking into account the forward-split ratio from the Company’s IPO, for service provided to us, valued at $1,095,230 and we issued (ii) 22,473 shares of Series G Preferred Stock, which has since been converted to Common Stock and forward-split representing 150,211 shares of Common Stock, for cash of $793,971. During the year ended December 31, 2016, we issued (i) 133,683 shares of Common Stock, on a forward-split basis, for service provided to us, valued at $469,450, we issued (ii) 76,577 shares of Series G Preferred Stock, which have since been converted to Common Stock and forward-split representing 511,852 shares of Common Stock for cash of $2,705,872, and we cancelled (iii) 9,468 shares of Series G Preferred Stock, representing 1,416 shares prior to the forward-split, valued at $50,000, due to nonperformance of services. In October 2016, we hired a Chief Operating Officer. Under the terms of the agreement, we granted options to purchase shares of our Common Stock equal to one and one-half percent (1.5%) of our issued and outstanding common shares then outstanding. These options will vest ratably over 48 months. Preferred Stock In connection with the Company’s IPO, all Preferred Stock included in Series A through Series G, totaling 1,394,953 shares at December 31, 2017, were converted to 9,324,177 shares of Common Stock in associated with the forward-split (See Capital Stock Note). Upon the completion of the IPO, the Company is authorized to issue 10,000,000 shares of Preferred Stock at a par value of $0.001 per share, none of which are outstanding as of December 31, 2017. Common Stock Upon the completion of the IPO, all of the Company’s non-voting Common Stock automatically converted to into Voting Common Stock on a one-to-one basis. Immediately following the completion of the IPO, the Company is authorized to issue 200,000,000 shares of Common Stock at a par value of $0.001 per share, which includes 200,000,000 shares of Voting Common Stock at a par value of $0.001.