XML 37 R24.htm IDEA: XBRL DOCUMENT v3.22.4
Share-Based Compensation & Warrants
 9 Months Ended
Sep. 30, 2022
Equity [Abstract]  
Share-Based Compensation & Warrants

Note 17. Share-Based Compensation & Warrants

 

Options

 

Generally accepted accounting principles require share-based payments to employees, including grants of employee stock options, warrants, and common stock to be recognized in the income statement based on their fair values at the date of grant, net of estimated forfeitures.

 

As of September 30, 2022 and December 31, 2021, the Company has granted stock-based compensation to employees, including a 16,667 share stock award, which was issued in 2018 and vested in May 2022, 166,667 in employee stock options that were issued in 2020 to cliff vest at the end of five years, but were cancelled on September 1, 2022 by the parties in conjunction with the issuance of 1,872,918 employee stock options granted in June 2022 that were to vest over a period of two years, for which 451,158 of these options were cancelled with the resignation without cause of our Chief Executive Officer. For the nine months ended September 30, 2022 and 2021, stock-based compensation was $2,185,615 and $334,584. In 2020, the Company also granted non-statutory stock options, including 133,333 stock options to the Board of Directors, which vested over 1 year, and a 333,334 stock option to a consultant, which was to vest over 4 years, but was cancelled on September 1, 2022 by the parties which concluded that is was not probable that certain performance targets would be met, as agreed upon by both parties. Non-statutory stock-based compensation was $1,172,500 and $1,157,500 for the nine months ended September 30, 2022 and 2021. In 2022, the Company closed on its underwritten public offering in which the Company granted the underwriter, EF Hutton, division of Benchmark Investments, LLC (“EF Hutton”), a 45-day option to purchase up to an additional 240,000 shares of Common Stock at the public offering price per share, less the underwriting discounts and commissions, to cover over-allotments, if any. These options were not exercised and expired.

 

There were no other options granted during the nine months ended September 30, 2022 and 2021, respectively.

 

The assumptions used in the Black-Scholes option pricing model to determine the fair value of the options on the date of issuance are as follows:

   
    December 31, 2020 through September 30, 2022
Risk-free interest rate   0.24 – 3.04%
Expected dividend yield   None
Expected life of warrants   3.33-10 years
Expected volatility rate   169 - 273%

  

The following table summarizes all stock option activity of the Company for the nine months ended September 30, 2022 and 2021:

                 
                Weighted  
          Weighted     Average  
          Average     Remaining  
    Number     Exercise     Contractual  
    of Shares     Price     Life (Years)  
                   
Outstanding, December 31, 2021     650,000     $ 12.00       7.53  
Granted     2,112,919       2.24       6.60  
Exercised     (16,667 )     11.10       –  
Forfeited/canceled     (740,000 )     10.00       –  
Outstanding, September 30, 2022     2,006,251     $ 2.56       6.93  
                         
Exercisable, December 31, 2021     180,000     $ 12.00       7.01  
Exercisable, September 30, 2022     1,175,059     $ 2.67       7.09  
                         
Outstanding, December 31, 2020     650,000     $ 12.00       8.53  
Outstanding, September 30, 2021     650,000     $ 12.00       7.78  
                         
Exercisable, December 31, 2020     47,083     $ 12.00       6.27  
Exercisable, September 30, 2021     144,167     $ 12.00       7.01   

 

As of September 30, 2022 and December 31, 2021, the aggregate intrinsic value of the Company’s outstanding options was approximately none. The aggregate intrinsic value will change based on the fair market value of the Company’s common stock.

 

Warrants

 

As of September 30, 2022 and December 31, 2021, the Company had 80,000 and no warrants outstanding. On February 14, 2022, the Company closed on its underwritten public offering of 1,600,000 shares of common stock, at a public offering price of $5.00 per share. In addition, the Company has issued the underwriter, EF Hutton, 5-year warrants to purchase 80,000 shares of common stock at an exercise price equal $5.75. and were valued with a fair market value of $374,000. We used the Black-Scholes option pricing model to determine the fair value of the warrants, with assumptions of a risk free rate of 1.92%, an expected life of 5 years, and volatility of 167%. The impact of these warrants has no effect on stockholder’s equity, as they are considered equity-like instruments, and are considered a direct expense of the offering.