XML 26 R15.htm IDEA: XBRL DOCUMENT

9. SHAREHOLDERS' EQUITY

6 Months Ended

Jun. 30, 2019

Stockholders' Equity:

NOTE 9. SHAREHOLDERS' EQUITY

Our Board of Directors (the “Board”) may, without further action by our shareholders, from time to time, direct the issuance of any authorized but unissued or unreserved shares of preferred stock in series and at the time of issuance, determine the rights, preferences and limitations of each series. The holders of such preferred stock may be entitled to receive a preference payment in the event of any liquidation, dissolution or winding-up of the Company before any payment is made to the holders of our common stock. Furthermore, the Board could issue preferred stock with voting and other rights that could adversely affect the voting power of the holders of our common stock.

Convertible Series A Preferred Stock

Our authorized Convertible Series A Preferred Stock, $0.01 par value, consists of 1,000,000 shares. At June 30, 2019 and December 31, 2018, there were 510,000 shares issued and outstanding. The Convertible Series A Preferred Stock is convertible at the rate of one share of common stock for one share of Convertible Series A Preferred Stock.

Convertible Series B Preferred Stock

Our authorized Convertible Series B Preferred Stock, $1,000 stated value, 7.5% cumulative dividend, consists of 4,000 shares. At June 30, 2019 and December 31, 2018, there were no shares issued and outstanding, respectively. Each share of Convertible Series B Preferred Stock may be converted (at the holder’s election) into two hundred shares of our common stock.

Common Stock

During the six months ended June 30, 2018, we issued 362,500 shares of common stock valued at $37,500 to members of our board of directors (see Note 11).

In May 2018, we issued 1,877,960 shares of common stock in connection with the conversion of $705,212 of principal and accrued interest outstanding under a Note (see Note 8).

During the six months ended June 30, 2019, we issued 400,000 shares of common stock valued at $44,000 to members of our board of directors (see Note 11). During the six months ended June 30, 2019, we issued 10,000 shares of common stock valued at $1,200 to a consultant.

Stock Options

In January 2018, we issued options to purchase an aggregate of 100,000 shares of common stock to our Chief Operating Officer, valued at $11,780. The options have an exercise price of $0.12 per share and expire in January 2023. The options were valued using the Black-Scholes model using the following assumptions: volatility: 146%; dividend yield: 0%; zero coupon rate: 2.27%; and a life of 5 years.

In January 2018, we issued options to purchase an aggregate of 20,000 shares of common stock to our Scientific Advisory Board members, valued at $1,810 in total. The options have an exercise price of $0.10 per share and expire in January 2028. The options were valued using the Black-Scholes model using the following assumptions: volatility: 147%; dividend yield: 0%; zero coupon rate: 2.41%; and a life of 10 years.

In January 2019, pursuant to an employment agreement, we issued options to purchase an aggregate of 250,000 shares of common stock to our Chief Operating Officer, valued at $24,694. The options have an exercise price of $0.11 per share and expire in January 2024. The options were valued using the Black-Scholes model using the following assumptions: volatility: 144%; dividend yield: 0%; zero coupon rate: 2.47%; and a life of 5 years. The value of the options was expensed in the fourth quarter of 2018 and included in accrued expenses at December 31, 2018.

In January 2019, we issued options to purchase an aggregate of 50,000 shares of common stock to our Chief Financial Officer, valued at $4,483. The options have an exercise price of $0.10 per share and expire in January 2024. The options were valued using the Black-Scholes model using the following assumptions: volatility: 143%; dividend yield: 0%; zero coupon rate: 2.58%; and a life of 5 years.

The following table summarizes stock options outstanding as of June 30, 2019 and December 31, 2018:

		June 30, 2019 (Unaudited)								December 31, 2018
		Number of Options				Weighted Average Exercise Price				Number of Options				Weighted Average Exercise Price
Outstanding, beginning of period			320,000			$	0.52				200,000			$	0.76
Granted			300,000				0.11				120,000				0.12
Exercised			—				—				—				—
Outstanding, end of period			620,000			$	0.32				320,000			$	0.52

Options outstanding and exercisable by price range as of June 30, 2019 were as follows:

	Outstanding Options								Average Weighted				Exercisable Options
	Range				Number				Remaining Contractual Life in Years				Number				Weighted Average Exercise Price

	$	0.05				20,000				1.53				20,000			$	0.05
	$	0.10				70,000				5.72				70,000			$	0.10
	$	0.11				250,000				4.51				250,000			$	0.11
	$	0.12				100,000				3.53				100,000			$	0.12
	$	0.27				40,000				5.51				40,000			$	0.27
	$	0.55				100,000				6.60				100,000			$	0.55
	$	2.10				40,000				0.51				40,000			$	2.10
						620,000				4.54				620,000			$	0.32

Stock Warrants

We did not issue any warrants during the six months ended June 30, 2018.

In January 2019 we issued a warrant to purchase 1,000,000 shares of common stock to the CEO at an exercise price of $0.10 per share pursuant to an employment agreement. The warrant was valued at $89,654 and has a term of 5 years. We utilized the Black-Scholes model to fair value the warrant received by the CEO with the following assumptions: volatility, 143%; expected dividend yield, 0%; risk free interest rate, 2.58%; and a life of 5 years. The grant date fair value of each share of common stock underlying the warrant was $0.09.

In January 2019 we issued a warrant to purchase 250,000 shares of common stock to an employee at an exercise price of $0.12 per share. The warrant was valued at $21,931 and has a term of 3 years. We utilized the Black-Scholes model to fair value the warrant received by the employee with the following assumptions: volatility, 148%; expected dividend yield, 0%; risk free interest rate, 2.55%; and a life of 3 years. The grant date fair value of each share of common stock underlying the warrant was $0.09. The value of the warrants was expensed in the fourth quarter of 2018 and included in accrued expenses at December 31, 2018.

In April 2019 we issued a warrant to purchase 50,000 shares of common stock to an employee at an exercise price of $0.14 per share. The warrant was valued at $6,116 and has a term of 5 years. We utilized the Black-Scholes model to fair value the warrant received by the employee with the following assumptions: volatility, 134%; expected dividend yield, 0%; risk free interest rate, 2.32%; and a life of 5 years. The grant date fair value of each share of common stock underlying the warrant was $0.12.

The following table summarizes the outstanding common stock warrants as of June 30, 2019 and December 31, 2018:

		June 30, 2019 (Unaudited)								December 31, 2018
		Number of Warrants				Weighted Average Exercise Price				Number of Warrants				Weighted Average Exercise Price
Outstanding, beginning of period			26,550,611			$	0.34				35,501,411			$	0.33
Granted			1,300,000				0.11				250,000				0.08
Exercised			-				-				-				-
Expired			(1,000,000	)			(0.30	)			(9,200,800	)			(0.30	)
Outstanding, end of period			26,850,611			$	0.33				26,550,611			$	0.34

Warrants outstanding and exercisable by price range as of June 30, 2019 were as follows:

	Outstanding Warrants												Exercisable Warrants
	Exercise Price				Number				Average Weighted Remaining Contractual Life in Years				Number				Weighted Average Exercise Price
	$	0.08				250,000				4.40				250,000			$	0.08
	$	0.10				1,265,000				4.26				1,265,000			$	0.10
	$	0.12				3,750,000				3.42				3,750,000			$	0.12
	$	0.12				4,000,000				0.29				4,000,000			$	0.12
	$	0.14				50,000				4.80				50,000			$	0.14
	$	0.17				10,000				3.32				10,000			$	0.17
	$	0.27				250,000				2.50				250,000			$	0.27
	$	0.29				5,510,088				0.17				5,510,088			$	0.29
	$	0.29				4,615,525				2.66				4,615,525			$	0.29
	$	0.30				2,300,000				1.14				2,300,000			$	0.30
	$	0.32				250,000				2.25				250,000			$	0.32
	$	0.42				250,000				2.00				250,000			$	0.42
	$	0.50				250,000				1.75				250,000			$	0.50
	$	0.55				100,000				1.58				100,000			$	0.55
	$	0.69				999,998				0.72				999,998			$	0.69
	$	1.00				3,000,000				0.84				3,000,000			$	1.00
						26,850,611				1.57				26,850,611			$	0.33

There were no unvested warrants outstanding as of June 30, 2019.