7.  Stockholders’ Equity

Common Stock

2018

On February 7, 2018, the Company issued 12,500 shares of our common stock, at a price of $0.78 per share, for the gross proceeds of $9,595 in conjunction with one employee that exercised vested stock options.

On February 23, 2018, the Company issued 1,808 shares of our common stock in a cashless transaction related to a 25,000 warrant exercise.

During the three months ended March 31, 2018, the Company issued 2,018,125 shares of common stock for $2,018,125 related to the exercise of certain warrants.

In June 2018, the Company commenced a private placement of its common shares at an offering price of $1.00 per share. As of September 30, 2018, the Company had sold 5,775,000 shares of its common stock for gross proceeds of $5,775,000. In addition, the Company issued 1,047,583 shares of its common stock associated with the cancellation of $1,000,000 of principal, $47,583 of accrued interest, and a loss on conversion of $41,902 under its February 2018 private placement Notes (See Note 6).

On August 29, 2018, the Company issued 24,792 shares of our common stock, at a price of $0.48 per share, for the gross proceeds of $11,875 in conjunction with one employee that exercised vested stock options.

On October 19, 2018, the Company issued 84,679 shares of our common stock, at a price of $1.20 per share, for the gross proceeds of $101,615 in conjunction with the exercise of warrants.

On November 6, 2018, the Company issued 8,426 shares of our common stock in a cashless transaction related to a 25,000 warrant exercise.

On December 31, 2018, the Company recorded stock-based compensation expense of $260,000 related to restricted stock units for members of our board of directors.

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. As of September 30, 2019, the Company had 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).

As of September 30, 2019, and December 31, 2018 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, 2018 and for the nine months ended September 30, 2019:

The weighted average exercise price of stock options granted during the period was $1.03 and the related weighted average grant date fair value was $0.72 per share.

2018

On January 1, 2018, the Company granted two employees a total of 10,000 options to purchase shares of the Company common stock at the closing price as of January 1, 2018 of $1.20 per share. The Option Shares will vest ratably over forty-eight (48) months and are exercisable until January 1, 2028. The total estimated value using the Black-Scholes Model, based on a volatility rate of 104.04% and an option fair value of $.97 was $9,729.

On January 8, 2018, 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 January 8, 2018 of $1.20 per share. The Option Shares will vest ratably over forty-eight (48) months and are exercisable until January 8, 2028. The total estimated value using the Black-Scholes Model, based on a volatility rate of 104.06% and an option fair value of $.97 was $48,682.

On January 29, 2018, the Company granted one employee a total of 20,000 options to purchase shares of the Company common stock at the closing price as of January 29, 2018 of $1.03 per share. The Option Shares will vest ratably over forty-eight (48) months and are exercisable until January 29, 2028. The total estimated value using the Black-Scholes Model, based on a volatility rate of 103.49% and an option fair value of $.83 was $16,690.

On February 7, 2018, the Company issued 12,500 shares of our common stock, at a price of $0.78 per share, for the gross proceeds of $9,595 in conjunction with one employee that exercised vested stock options.

On February 15, 2018, the Company granted one employee a total of 100,000 options to purchase shares of the Company common stock at the closing price as of February 15, 2018 of $1.12 per share. The Option Shares will vest ratably over forty-eight (48) months and are exercisable until February 15, 2028. The total estimated value using the Black-Scholes Model, based on a volatility rate of 103.60% and an option fair value of $.91 was $90,904.

On March 26, 2018, the Company granted one employee a total of 300,000 options to purchase shares of the Company common stock at the closing price as of March 26, 2018 of $1.10 per share. The Option Shares will vest ratably over forty-eight (48) months and are exercisable until March 26, 2028. The total estimated value using the Black-Scholes Model, based on a volatility rate of 101.94% and an option fair value of $.88 was $265,575.

On April 16, 2018, 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 April 16, 2018 of $1.06 per share. The Option Shares will vest ratably over forty-eight (48) months and are exercisable until April 16, 2028. The total estimated value using the Black-Scholes Model, based on a volatility rate of 102.07% and an option fair value of $.85 was $42,693.

On May 7, 2018, 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 May 7, 2018 of $0.90 per share. The Option Shares will vest ratably over forty-eight (48) months and are exercisable until May 7, 2028. The total estimated value using the Black-Scholes Model, based on a volatility rate of 101.42% and an option fair value of $.72 was $7,231.

On June 1, 2018, 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 June 1, 2018 of $1.12 per share. The Option Shares will vest ratably over forty-eight (48) months and are exercisable until June 1, 2028. The total estimated value using the Black-Scholes Model, based on a volatility rate of 95.44% and an option fair value of $.87 was $8,705.

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.

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, 2019 and 2018 were as follows:

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, 2019 and 2018.

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 2019 and 2018 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, 2018 and for the nine months ended September 30, 2019:

2018

During the twelve months ended December 31, 2018, the Company did not issue any restricted stock units. During the twelve months ended December 31, 2018, the Company recorded $37,249 in restricted stock units amortization and $260,000 in board compensation.

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) January 1, 2022, (B) a change in control of the Company, and (C) 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) March 31, 2022, (B) a change in control of the Company, and (C) 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, 2019 and 2018 was as follows: 

As of September 30, 2019, there was no unearned restricted stock unit compensation.

Warrants Issued to Investors and Placement Agents

At September 30, 2019, we have warrants to purchase 432,500 shares of common stock at $1.20 per share, 234,500 at $1.00 per share, and 2,691,459 at $1.25 per share, respectively, which are outstanding. Of the outstanding warrants, 667,000 expire in 2020 and 2,691,459 expire in 2021.