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Stock Options and Warrants | 3 Months Ended
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Mar. 31, 2021
Share-based Payment Arrangement [Abstract] |
STOCK OPTIONS AND WARRANTS | Stock Options On March 9, 2021 the Company granted to employees an aggregate of 397,500 options to purchase common stock, exercisable at $3.45 per share, under the terms of the 2017 Equity Incentive Plan. The options have a term of five years. The options will vest quarterly over one year, with the first portion vesting on June 9, 2021. The options have been valued at $1,371,231 using the Black Sholes model and compensation expense will be recorded over the vesting period. We have recorded compensation expense of $85,702 related to the options during the three months ended March 31, 2021. The assumptions used in the Black Scholes model are as follows: (1) dividend yield of 0%; (2) expected volatility of 346%, (3) risk-free interest rate of 0.8%, (4) expected term of 5 years. On February 10, 2021 the Company granted to a director 50,000 options to purchase common stock, exercisable at $2.70 per share, under the terms of the 2017 Equity Incentive Plan. The options have a term of five years. The options will vest quarterly over three years with the first portion vesting on May 10, 2021. The options have been valued at $134,986 using the Black Sholes model and compensation expense will be recorded over the vesting period. We have recorded compensation expense of $6,300 related to the options during the three months ended March 31, 2021. The assumptions used in the Black Scholes model are as follows: (1) dividend yield of 0%; (2) expected volatility of 354%, (3) risk-free interest rate of 0.8%, (4) expected term of 5 years. On March 24, 2021 the Company granted to a director 50,000 options to purchase common stock, exercisable at $3.25 per share, under the terms of the 2017 Equity Incentive Plan. The options have a term of five years. The options will vest quarterly over three years, with the first portion vesting on June 24, 2021. The options have been valued at $162,491 using the Black Sholes model and compensation expense will be recorded over the vesting period. We have recorded compensation expense of $1,128 related to the options during the three months ended March 31, 2021. The assumptions used in the Black Scholes model are as follows: (1) dividend yield of 0%; (2) expected volatility of 359%, (3) risk-free interest rate of 0.83%, (4) expected term of 5 years. During the three months ended March 31, 2021, we recorded $260,440 of compensation expense related to stock options granted in prior years. Warrants Recorded as Derivative Liabilities Series D Preferred Stock Warrants The Company identified embedded features in the warrants issued with Series D Preferred Stock in 2019 and 2020 which caused the warrants to be classified as a derivative liability. These embedded features included the right for the holders to request for the Company to cash settle the warrants to the holder by paying to the holder an amount of cash equal to the Black-Scholes value of the remaining unexercised portion of the warrants on the date of the consummation of a fundamental transaction, as defined in the warrant instrument. The accounting treatment of derivative financial instruments requires that the Company treat the whole instrument as liability and record the fair value of the instrument as a derivative as of the inception date of the instrument and to adjust the fair value of the instrument as of each subsequent balance sheet date. During the three months ended March 31, 2021, the Company recorded other income of $478,295, respectively, related to the change in the fair value of the derivative. The fair value of the embedded derivative was $3,812,098 as of March 31, 2021, determined using the Black Scholes model based on a risk-free interest rate of 0.35% - 0.635%, an expected term of 3 – 4.1 years, an expected volatility of 209 – 308% and a 0% dividend yield. On January 5, 2021, pursuant to an agreement with the holder, 133,341 Series D warrants were cancelled. We have reclassified the $373,070 derivative value of the warrants to paid in capital upon extinguishment. Convertible Debenture Warrants and Placement Agent Warrants The Company identified embedded features in the warrants issued with the convertible debt and the placement agent warrants in 2020 and 2021 (see Note 7) and which caused the warrants to be classified as a derivative liability. These embedded features included the right for the holders to request for the Company to cash settle the warrants to the holder by paying to the holder an amount of cash equal to the Black-Scholes value of the remaining unexercised portion of the warrants on the date of the consummation of a fundamental transaction, as defined in the warrant instrument. The accounting treatment of derivative financial instruments requires that the Company treat the whole instrument as liability and record the fair value of the instrument as a derivative as of the inception date of the instrument and to adjust the fair value of the instrument as of each subsequent balance sheet date. As of the issuance date of the 2021 Debenture warrants, the Company determined a fair value of $5,040,080 for the 1,926,865 warrants. The fair value of the warrants was determined using the Black-Scholes Model based on a risk-free interest rate of 0.17% - 0.19%, an expected term of 3 years, an expected volatility of 215% - 216% and a 0% dividend yield. Of this amount, $1,454,097 was recorded as debt discount (see Note 7) and $3,585,983 was charged to expense as initial derivative expense. As of the issuance date of the 2021 placement agent warrants, the Company determined a fair value of $919,979 for the 349,876 warrants. The fair value of the warrants was determined using the Black-Scholes Model based on a risk-free interest rate of 0.17% - 0.19%, an expected term of 3 years, an expected volatility of 215% and a 0% dividend yield. The value of $919,979 has been recorded as debt discount for debt cost (see Note 7). During the three months ended March 31, 2021, the Company recorded other income of $150,326 related to the change in the fair value of the derivative. The fair value of the embedded derivative was $12,684,266 as of March 31, 2021, determined using the Black Scholes model based on a risk-free interest rate of 0.16% - 0.35%, an expected term of 2.16 – 2.85 years, an expected volatility of 212% - 220% and a 0% dividend yield.

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