Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity

v3.20.2
Stockholders' Equity
9 Months Ended
Sep. 30, 2020
Share-based Payment Arrangement [Abstract]  
Stockholders' Equity

7. Stockholders’ Equity

 

Common Stock

 

2019

 

In July 2019, the Company commenced a private placement of its common stock units, with each unit consisting of one share of our common stock and a warrant to purchase to one-half share of our common stock at an exercise price of $1.25 per share at an offering price of $1.00 per unit. The Company sold 2,800,000 units of its common stock for gross proceeds of $2,800,000. In addition, the Company issued 2,582,916 units of its common stock associated with the conversion of $2,500,000 of principal, $82,916 of accrued interest, and a loss on conversion of $232,462 (See Note 6).

 

2020

 

On March 2, 2020, the Company issued 234,500 shares of common stock in exchange for cash in conjunction with a warrant exercise. The shares were exercised at the strike price of $1.00 per share.

 

On September 17, 2020, the Company issued 15,000 shares of common stock in exchange for cash in conjunction with a stock option exercise. The shares were exercised at the strike price of $0.48 per share.

 

As of September 30, 2020 and December 31, 2019 we had an equity payable balance of $100,862.

 

Stock-based Plans

 

Stock Option Activity

 

The following table summarizes stock option activity for the year ended December 31, 2019 and for the nine months ended September 30, 2020:

 

    Options  
Outstanding at December 31, 2018     4,987,426  
Granted     2,592,500  
Exercised     -  
Forfeit/canceled     (923,389 )
Expired     (874,653 )
Outstanding at December 31, 2019     5,781,884  
Granted     715,000  
Exercised     (15,000 )
Forfeit/canceled     (579,695 )
Expired     (438,127 )
Outstanding at September 30, 2020     5,464,062  

 

The weighted average exercise price of stock options granted during the period was $0.70 and the related weighted average grant date fair value was $0.47 per share.

 

2019

 

On January 7, 2019, the Company granted one employee a total of 10,000 options to purchase shares of the Company common stock at the closing price as of January 7, 2019 of $1.17 per share. The Option Shares will vest ratably over forty-eight (48) months and are exercisable until January 7, 2029. The total estimated value using the Black-Scholes Model, based on a volatility rate of 90.82% and an option fair value of $.88 was $8,821.

 

On January 21, 2019, the Company granted one employee a total of 15,000 options to purchase shares of the Company common stock at the closing price as of January 21, 2019 of $1.17 per share. The Option Shares will vest ratably over forty-eight (48) months and are exercisable until January 21, 2029. The total estimated value using the Black-Scholes Model, based on a volatility rate of 90.75% and an option fair value of $.88 was $13,239.

 

On February 12, 2019, the Company granted one employee a total of 150,000 options to purchase shares of the Company common stock at the closing price as of February 12, 2019 of $1.00 per share. The Option Shares will vest ratably over forty-eight (48) months and are exercisable until February 12, 2029. The total estimated value using the Black-Scholes Model, based on a volatility rate of 90.79% and an option fair value of $.75 was $113,046.

 

On February 18, 2019, the Company granted one employee a total of 15,000 options to purchase shares of the Company common stock at the closing price as of February 18, 2019 of $1.05 per share. The Option Shares will vest ratably over forty-eight (48) months and are exercisable until February 18, 2029. The total estimated value using the Black-Scholes Model, based on a volatility rate of 90.88% and an option fair value of $.84 was $12,537.

 

On February 25, 2019, the Company granted one employee a total of 50,000 options to purchase shares of the Company common stock at the closing price as of February 25, 2019 of $1.00 per share. The Option Shares will vest ratably over forty-eight (48) months and are exercisable until February 25, 2029. The total estimated value using the Black-Scholes Model, based on a volatility rate of 90.88% and an option fair value of $.75 was $37,697.

 

On March 11, 2019, the Company granted one employee a total of 50,000 options to purchase shares of the Company common stock at the closing price as of March 11, 2019 of $1.00 per share. The Option Shares will vest ratably over forty-eight (48) months and are exercisable until March 11, 2029. The total estimated value using the Black-Scholes Model, based on a volatility rate of 90.90% and an option fair value of $.75 was $37,688.

 

On May 17, 2019, the Company granted three employees a total of 1,775,000 options to purchase shares of the Company common stock at the closing price as of May 17, 2019 of $1.04 per share. The Option Shares will vest ratably over forty-eight (48) months and are exercisable until May 17, 2029. The total estimated value using the Black-Scholes Model, based on a volatility rate of 80.17% and an option fair value of $.72 was $1,283,178.

 

On August 21, 2019, the Company granted four employees a total of 140,000 options to purchase shares of the Company common stock at the closing price as of August 21, 2019 of $0.95 per share. The Option Shares will vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until August 21, 2029. The total estimated value using the Black-Scholes Model, based on a volatility rate of 80.17% and an option fair value of $.65 was $91,537.

 

On October 21, 2019, the Company granted one employee 150,000 options to purchase shares of the Company common stock at the closing price as of October 21, 2019 of $0.98 per share. The Option Shares will vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until October 21, 2029. The total estimated value using the Black-Scholes Model, based on a volatility rate of 74.18% and an option fair value of $.64 was $96,165.

 

On November 19, 2019, the Company granted twelve employees a total of 237,500 options to purchase shares of the Company common stock at the closing price as of November 19, 2019 of $0.88 per share. The Option Shares will vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until November 19, 2029. The total estimated value using the Black-Scholes Model, based on a volatility rate of 78.70% and an option fair value of $.60 was $142,409.

 

2020

 

On March 24, 2020, the Company granted one employee a total of 15,000 options to purchase shares of the Company common stock at the closing price as of March 24, 2020 of $0.65 per share. The Option Shares will vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until March 24, 2030. The total estimated value using the Black-Scholes Model, based on a volatility rate of 77.56% and an option fair value of $.43 was $6,472.

 

On April 6, 2020, the Company granted four employees a total of 700,000 options to purchase shares of the Company common stock at the closing price as of April 6, 2020 of $0.70 per share. The Option Shares will vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until April 6, 2030. The total estimated value using the Black-Scholes Model, based on a volatility rate of 78.21% and an option fair value of $.47 was $326,752.

 

Stock-Based Compensation Expense from Stock Options and Warrants

 

The impact on our results of operations of recording stock-based compensation expense for the three and nine months ended September 30, 2020 and 2019 were as follows:

 

    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2020     2019     2020     2019  
General and administrative   $ 61,081     $ 94,122     $ 197,778     $ 584,160  
Sales and marketing     20,914       13,020       55,512       63,575  
Engineering, research, and development     39,460       40,607       125,922       111,567  
    $ 121,455     $ 147,749     $ 379,212     $ 759,302  

 

Valuation Assumptions

 

The fair value of each stock option award was calculated on the date of grant using the Black-Scholes option pricing model. The following weighted average assumptions were used for the nine months ended September 30, 2020 and 2019.

 

    Nine Months Ended  
    September 30,  
    2020     2019  
Risk-free interest rate     0.49 %     2.21 %
Expected life (years)     6.00       6.00  
Expected dividend yield     - %     - %
Expected volatility     78.20 %     81.57 %

 

The risk-free interest rate assumption is based upon published interest rates appropriate for the expected life of our employee stock options.

 

The expected life of the stock options represents the weighted-average period that the stock options are expected to remain outstanding and was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of its stock-based awards.

 

The dividend yield assumption is based on our history of not paying dividends and no future expectations of dividend payouts.

 

The expected volatility in 2020 and 2019 is based on the historical publicly traded price of our common stock.

 

Restricted stock units

 

The following table summarizes restricted stock unit activity under our stock-based plans for the year ended December 31, 2019 and for the nine months ended September 30, 2020:

 

    Shares  
Outstanding at December 31, 2018     662,800  
Awarded     489,448  
Released     -  
Canceled/forfeited/expired     -  
Outstanding at December 31, 2019     1,152,248  
Awarded     181,252  
Released     -  
Canceled/forfeited/expired     -  
Outstanding at September 30, 2020     1,333,500  
         
Expected to vest at September 30, 2020     1,333,500  
Vested at September 30, 2020     1,333,500  
Unvested at September 30, 2020     -  
Unrecognized expense at September 30, 2020   $ -  

 

2019

 

On January 1, 2019, the Company issued to four independent directors a total of 222,224 restricted stock units. These restricted stock units were issued for the $260,000 of board compensation earned in 2018. The units were valued at $260,000 or $1.17 per share, based on the closing stock price on the date of grant. All units vested immediately. The shares of Common Stock associated with the Restricted Stock Unit evidenced by this Agreement will be issued to the director upon the earliest to occur of (A) a change in control of the Company, and (B) the termination of the director’s service with the Company.

 

On March 31, 2019, the Company granted four independent directors a total of 72,224 restricted stock units. The units were valued at $65,001 or $0.90 per share, based on the closing stock price on the date of grant. All units vested immediately. The shares of Common Stock associated with the Restricted Stock Unit evidenced by this Agreement will be issued to the director upon the earliest to occur of (A) a change in control of the Company, and (B) the termination of the director’s service with the Company.

 

On December 31, 2019, the Company granted four independent directors a total of 195,000 restricted stock units. The units were valued at $195,000 or $1.00 per share, based on the closing stock price on the date of grant. All units vested immediately. The shares of Common Stock associated with the Restricted Stock Unit evidenced by this Agreement will be issued to the director upon the earliest to occur of (A) a change in control of the Company, and (B) the termination of the director’s service with the Company.

 

2020

 

On March 24, 2020, the Company granted four independent directors a total of 100,000 restricted stock units. The units were valued at $65,000 or $0.65 per share, based on the closing stock price on the date of grant. All units vested immediately. The shares of Common Stock associated with the Restricted Stock Unit evidenced by this Agreement will be issued to the director upon the earliest to occur of (A) a change in control of the Company, and (B) the termination of the director’s service with the Company.

 

On August 7, 2020, the Company granted four independent directors a total of 81,252 restricted stock units. The units were valued at $65,002 or $0.80 per share, based on the closing stock price on the date of grant. All units vested immediately. The shares of Common Stock associated with the Restricted Stock Unit evidenced by this Agreement will be issued to the director upon the earliest to occur of (A) a change in control of the Company, and (B) the termination of the director’s service with the Company.

 

Stock Based Compensation from Restricted Stock

 

The impact on our results of operations of recording stock-based compensation expense for restricted stock units for the three and nine months ended September 30, 2020 and 2019 was as follows:

 

    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2020     2019     2020     2019  
General and administrative   $ 65,002     $ -     $ 130,002     $ 65,001  
    $ 65,002     $ -     $ 130,002     $ 65,001  

 

As of September 30, 2020, there was no unearned restricted stock unit compensation.

 

Warrants Issued to Investors and Placement Agents

 

At September 30, 2020, we have outstanding warrants to purchase 2,691,459 at $1.25 per share. These warrants expire in 2021.