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Note 10 - Stockholders' Equity

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

NOTE 10 - STOCKHOLDERS' EQUITY

Common Stock – The Company has 25,000,000 authorized shares of common stock, $0.001 par value. As of December 31, 2020 and 2019, respectively, there were 21,655,461 and 20,547,668 common shares issued and outstanding.

Voting -- Holders of common stock are entitled to one vote for each share held of record on each matter submitted to a vote of stockholders, including the election of directors, and do not have any right to cumulate votes in the election of directors.

Dividends -- Subject to the rights and preferences of the holders of any series of preferred stock, if any, which may at the time be outstanding, holders of common stock are entitled to receive ratably such dividends as our Board of Directors from time to time may declare out of funds legally available.

Liquidation Rights -- In the event of any liquidation, dissolution or winding-up of affairs, after payment of all of our debts and liabilities and subject to the rights and preferences of the holders of any outstanding shares of any series of our preferred stock, the holders of common stock will be entitled to share ratably in the distribution of any of our remaining assets.

Other Matters -- Holders of common stock have no conversion, preemptive or other subscription rights, and there are no redemption rights or sinking fund provisions with respect to our common stock. All of the issued and outstanding shares of common stock on the date of this Annual Report are validly issued, fully paid and non-assessable.

Preferred Stock -- Our Board of Directors has the authority to issue preferred stock in one or more classes or series and to fix the designations, powers, preferences and rights, the qualifications, limitations or restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any class or series, without further vote or action by the stockholders. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control without further action by the stockholders and may adversely affect the voting and other rights of the holders of common stock.

The Company has 2,500,000 authorized Preferred stock, $0.001 par value. As of December 31, 2020 and 2019 there were no mandatory convertible preferred shares issued and outstanding.

Stock Issuances

Since January 1, 2020, the Company has made the following issuances of common stock:

On January 15, 2020, the Company issued 8,212 common shares per Board authorization valued at $45,000 for services provided by the Board of Directors. The Company recognized the stock-based compensation of the shares over the requisite service period.

On May 21, 2020, the Company completed a Securities Purchase Agreement with certain accredited investors in a private placement pursuant to which the Company issued and sold an aggregate of 1,085,000 shares of common stock, par value $0.001 per share, at a purchase price of $5.00 per share for gross proceeds of $4,662,125 including costs of $762,875 for placement fees, lawyer fees, auditor fees and other costs related to the capital raise, and a prefunded warrant to purchase an aggregate of 515,000 shares of Common Stock, at a purchase price of $5.00 per share, for gross proceeds of $2,575,000.

On June 6, 2020, the Company issued 8,333 common shares to settle RSUs. The RSUs were valued at $69,333 for services provided by the Board of Directors. The Company recognized the stock-based compensation of the award over the requisite service period.

On July 8 and August 18, 2020, the Company issued a total of 6,248 shares in connection with employees exercising stock options granted under the 2015 Stock Options Plan (the "2015 Plan"). The shares were issued at a share price of $2.96 and generated net proceeds of $18,500.

For the years ended December 31, 2020 and 2019, the Company has recorded stock-based compensation expense of $343,780 and $197,945, respectively.

Warrants

In connection with the Securities Purchase Agreement entered into in May 2020, we issued a prefunded warrant (“the Warrant”) to purchase an aggregate of 515,000 shares of Common Stock at a purchase price of $5.00 per share. Subject to certain beneficial ownership limitations, the Warrant is immediately exercisable and may be exercised for no additional consideration. The Warrant does not expire. A holder of the Warrant will not have the right to exercise any portion of the Warrant if the holder, together with Affiliates and Attribution Parties (as such terms are defined in the Warrant), would beneficially own in excess of 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Warrant. Upon notice from the holder to the Company, however, the holder may decrease or increase the beneficial ownership limitation (but not above 9.99% of the number of shares of Common Stock outstanding).

The following is a summary of the periodic changes in warrants outstanding for the year ended December 31, 2020:

		2020
Warrants outstanding at January 1			-
Prefunded warrants issued in May 2020			515,000
Exercises and conversions			-
Warrants outstanding at December 31			515,000

On August 12, 2020 the Warrant was amended. In the Warrant pre-amendment, the warrant holder could request that the Company should repay the value of the unexercised portion of the Warrant upon the occurrence of a fundamental transaction. The Warrant, as amended, required the fundamental transaction to be approved by the Board of Directors before any repayment could take place. This amendment changed the classification of the Warrant from a liability to equity, and the following is a summary of the periodic changes in the fair value during the year ended December 31, 2020:

Base value of warrants, 515,000 warrants at $5		$	2,575,000
Fair value adjustment			901,250
Balance at August 12, 2020 reclassified to equity		$	3,476,250

Stock-based Compensation

In 2013, the Company’s Board of Directors adopted a Share Incentive Plan (the “Incentive Plan”). Under the terms and conditions of the Incentive Plan, the Board of Directors is empowered to grant RSUs to officers and directors of the Company. At December 31, 2020, 128,299 RSUs were granted and outstanding under the Incentive Plan. Directors of the Company receive share compensation as follows: (i) an initial grant of 25,000 RSUs of common stock that vest over a three-year period upon appointment to the Board, followed by an annual grant of $35,000 ($70,000 for the Chairman of the Board) in RSUs per annum after full vesting of the initial grant. Further, the Company has granted shares to management for 2020 as part of the Incentive Plan, totaling 92,081 shares that vest over a three-year period.

The Company recognizes compensation costs for RSU grants to Directors and management based on the stock price on the date of the grant.

The Company recognized stock-based compensation expense related to RSU grants of $343,780 and $197,945 for the years ended December 31, 2020 and 2019, respectively. On December 31, 2020, the Company had $472,778 of unrecognized compensation cost related to non-vested stock grants.

A summary of the status of the RSUs outstanding as of December 31, 2020 and changes during the period are presented below:

		December 31, 2020
		Number of units				Weighted Average Grant-Date Fair value				Aggregated Intrinsic Value

Outstanding, December 31, 2019			133,747			$	5.47			$	50,824
Granted			44,430				6.47				-
Vested and settled with share issuance			(33,211	)			4.15				-
Forfeited			(16,667	)			8.32				-
Outstanding, December 31, 2020			128,299			$	5.79			$	250,183

Stock Options

In August 2015, the Company’s Board of Directors adopted a Stock Option Plan (the “Plan”). Under the terms and conditions of the Plan, the Board of Directors is empowered to grant stock options to employees, officers, and directors of the Company. At December 31, 2020, no options were granted and outstanding under the Plan.

The Company recognizes compensation costs for stock option awards to employees based on their grant-date fair value. The value of each stock option is estimated on the date of grant using the Black-Scholes option-pricing model.