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Shareholders' Equity

12 Months Ended

Dec. 31, 2020

Equity [Abstract]

Shareholders' Equity

(6) Shareholders’ Equity

(a) Common Stock and Warrants

On or around May 30, 2019, the Company sold to accredited investors a total of 1,276,599 shares of common stock and warrants expiring May 31, 2024 to purchase 638,295 shares of common stock at an exercise price of $3.384, $3.666 or $4.23 per share depending on the exercise date. Research Frontiers Incorporated also sold to Gauzy, at a price of $1.38 per unit, with each unit comprised of one share of unregistered common stock and one half of one warrant. The warrant can be converted into one share of unregistered common stock at an exercise price of $1.656, $1.794 or $2.07 per share depending on the exercise date. Gauzy received a total of 724,638 shares of unregistered common stock and warrants expiring May 31, 2024 to purchase 362,319 shares of common stock. The aggregate proceeds from these stock offerings was $4.6 million.

Investors that participated in the May 30, 2019 offering agreed to amending/clarifying language to the terms of the warrants that they received in the September 7, 2018 offering. Those investors that received warrants in the September 7, 2018 offering that did not participate in the May 30, 2019 offering, separately agreed as of June 27, 2019 to the same amending/clarifying language used in the May 30, 2019 offering. The amending/clarifying language relating to the September 7, 2018 warrants does not allow for a net cash settlement option for the warrants even if no registered shares of common stock are available upon the exercise of the warrant. The warrant liability was valued at $1,153,439 (including all valuation adjustments since their issuance) through the date of these new agreements and amendments and, based on the amended warrant terms, the warrant liability was reclassified to equity as of these dates. The Company recorded a non-cash expense $652,025 for the twelve-month period ended December 31, 2019 to mark these warrants to their estimated market value as of their respective amendment/clarification date when they were reclassified as equity.

During 2019, the Company received proceeds of $1,170,546 and issued 1,587,814 shares of common stock in connection with the exercise of outstanding options and warrants. During 2020, the Company received proceeds of $284,207 and issued 321,524 shares of common stock in connection with the exercise of outstanding options and warrants.

(b) Options and Warrants

(i) Employee Options

In 2019, the shareholders approved the Company’s 2019 Equity Incentive Plan, which provides for the granting of both incentive stock options at the fair market value at the date of grant and nonqualified stock options at the fair market value at the date of grant to employees or non-employees who, in the determination of the Board of Directors, have made or may make significant contributions to the Company in the future. The Company may also award stock appreciation rights, restricted stock, or restricted stock units under this plan. The Company initially reserved 1,400,000 shares of its common stock for issuance under this plan, and 683,500 options and other awards were available for issuance under this plan as of December 31, 2020.

At the discretion of the Board of Directors, options expire in ten years or less from the date of grant and are generally fully exercisable upon grant but in some cases may be subject to vesting in the future. Full payment of the exercise price may be made in cash or in shares of common stock valued at the fair market value thereof on the date of exercise, or by agreeing with the Company to cancel a portion of the exercised options.

The Company granted 517,500 fully vested options during 2019 and recorded share-based compensation of $841,612. The Company granted 199,000 fully vested options during 2020 and recorded share-based compensation of $327,554. The Company valued these grants using the Black-Scholes option pricing model with the following weighted average assumptions:

		2020				2019

Fair value on grant date		$	1.65			$	1.63
Expected dividend yield			-				-
Expected volatility			73	%			63	%
Risk free interest rate			0.36	%			1.75	%
Expected term of the option			5 years				5 years

Activity for stock options is summarized below:

All options are exercisable at December 31, 2020.

										Weighted Average
		Number of Shares Subject to Option				Weighted Average Exercise Price				Remaining Contractual Term (Years)				Aggregate Intrinsic Value

Balance at December 31, 2018			1,126,092			$	3.84				6.6			$	161,602
Granted			517,500			$	3.00
Cancelled			(30,400	)		$	3.69
Exercised			(64,841	)		$	1.07
Balance at December 31, 2019			1,548,351			$	3.68				6.9			$	603,683

Granted			199,000			$	2.79
Cancelled			-
Exercised			(450,091	)		$	2.09
Balance at December 31, 2020			1,297,260			$	4.09				5.8			$	142,885

(ii) Warrants and Non-Employee Options

Activity in warrants is summarized below:

		Number of Shares Underlying				Weighted Average
		Warrants Granted				Exercise Price

Balance at December 31, 2018			2,628,294			$	1.49
Exercised			(1,961,765	)			1.20
Terminated			(184,000	)			6.00
Issued			1,000,614				2.76
Balance at December 31, 2019			1,483,143			$	2.13

Exercised			(83,152	)			3.42
Terminated			-
Issued			-
Balance at December 31, 2020			1,399,991			$	2.27

In lieu of cash compensation, the Company has granted warrants to investors and non-employee options to consultants. These warrants and non-employee options vested ratably over various terms ranging from 12 to 59 months. The non-employee options are valued at fair value at the time that the related services are provided using the Black-Scholes option valuation model and marked to market quarterly using the Black-Scholes option valuation model. There are 1,399,991 warrants issued to investors that are outstanding that are accounted for as equity.

Warrants and non-employee options generally expire in five years from the date of issuance. At December 31, 2020, all warrants and non-employee options outstanding were exercisable.

(c) Restricted Stock Grants

During 2020 and 2019, the Company did not issue restricted stock to its directors and employees.