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11. SHAREHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2020

Stockholders' Equity:

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 by us 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.

Reverse Stock Split

On September 9, 2020, the Board approved a reverse stock split of our common stock and our Convertible Series A Preferred Stock, in each case, at a ratio of 1-for-8 and without any change to the respective par value thereof (the “Reverse Stock Split”), and, on September 10, 2020, we filed an Articles of Amendment to our Articles of Incorporation with the Department of State of the State of Florida to effect the Reverse Stock Split. The Reverse Stock Split became effective as of 5:00 p.m., Eastern time, on September 10, 2020 (the “Effective Time”).  All per-share and share amounts have been retroactively restated in this Quarterly Report on Form 10-Q for all periods presented to reflect the reverse stock split.

Convertible Series A Preferred Stock

Our authorized Convertible Series A Preferred Stock, $0.01 par value, consists of 1,000,000 shares. At September 30, 2020 and December 31, 2019, there were 63,750 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 September 30, 2020 and December 31, 2019, 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 nine months ended September 30, 2019, we issued 50,000 shares of common stock valued at $44,000 to members of our Board (see Note 13). During the nine months ended September 30, 2019, we issued 1,250 shares of common stock valued at $1,200 to a consultant.

During the nine months ended September 30, 2020, we issued 50,000 shares of common stock valued at $48,000 to members of our Board (see Note 13). 

In March 2020, 1,041,667 shares of common stock were issued in connection with the conversion of convertible notes payable aggregating $4,500,000 (see Note 10).

In March 2020, 10,417 shares of common stock were issued in connection with the exercise of warrants for which we received proceeds of $57,500.

In May 2020, 2,500 shares of common stock were issued in connection with the exercise of options for which we received proceeds of $1,000.

In June 2020, 26,940 shares of common stock were issued in connection with the exercise of warrants for which we received proceeds of $62,500.

In July 2020, 26,940 shares of common stock were issued in connection with the exercise of warrants for which we received proceeds of $62,500.

Stock Options

In January 2019, pursuant to an employment agreement, we issued options to purchase an aggregate of 31,250 shares of common stock to our Chief Operating Officer, valued at $24,694. The options have an exercise price of $0.88 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 6,250 shares of common stock to our Chief Financial Officer, valued at $4,483. The options have an exercise price of $0.80 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.

In January 2020, we issued two options to purchase an aggregate of 31,250 shares of common stock to our Chief Operating Officer at an exercise price of $0.80 and $0.96 per share pursuant to her employment agreement with us. The options were valued at a total of $23,595 and have a term of 5 years. We utilized the Black-Scholes method to fair value the options received by the COO with the following assumptions: volatility, 135%; expected dividend yield, 0%; risk free interest rate, 1.64%; and a life of 5 years. The grant date fair value of each share of common stock underlying the options was $0.72 and $0.80. The value of the stock option was included in accrued expenses at December 31, 2019.

The following table summarizes stock options outstanding as of September 30, 2020 and December 31, 2019:

		September 30, 2020 (Unaudited)								December 31, 2019
		Number of Options				Weighted Average Exercise Price				Number of Options				Weighted Average Exercise Price
Outstanding, beginning of period			77,500			$	2.56				40,000			$	4.16
Granted			31,250				0.88				37,500				0.88
Exercised			(2,500	)			0.40				-				-
Expired			(5,000	)			16.8				-				-
Outstanding, end of period			101,250			$	1.38				77,500			$	2.56

Options outstanding and exercisable by price range as of September 30, 2020 were as follows:

	Outstanding Options								Average Weighted				Exercisable Options
	Range				Number				Remaining Contractual Life in Years				Number				Weighted Average Exercise Price
	$	0.80				27,500				4.35				27,500			$	0.80
	$	0.88				31,250				3.26				31,250			$	0.88
	$	0.96				25,000				3.27				25,000			$	0.96
	$	2.16				5,000				4.26				5,000			$	2.16
	$	4.40				12,500				5.35				12,500			$	4.40
						101,250				3.87				101,250			$	1.38

Stock Warrants

In January 2019 we issued a warrant to purchase 125,000 shares of common stock to our Chief Executive Officer at an exercise price of $0.80 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 our Chief Executive Officer 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 $0.72.

In January 2019 we issued a warrant to purchase 31,250 shares of common stock to an employee at an exercise price of $0.96 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 $0.72. 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 6,250 shares of common stock to an employee at an exercise price of $1.12 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 $0.96.

In January 2020 we issued a warrant to purchase 156,250 shares of common stock to our Chief Executive Officer at an exercise price of $1.20 per share pursuant to an employment agreement. The warrant was valued at $164,201 and has a term of 5 years. We utilized the Black-Scholes model to fair value the warrant received by our Chief Executive Officer with the following assumptions: volatility, 136%; expected dividend yield, 0%; risk free interest rate, 1.64%; and a life of 5 years. The grant date fair value of each share of common stock underlying the warrant was $1.04.

In January 2020 we issued a warrant to purchase 5,208 shares of common stock to an employee at an exercise price of $0.96 per share. The warrant was valued at $3,594 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, 135%; expected dividend yield, 0%; risk free interest rate, 1.58%; and a life of 5 years. The grant date fair value of each share of common stock underlying the warrant was $0.72. The value of the warrants was expensed in the fourth quarter of 2019 and included in accrued expenses at December 31, 2019.

In February 2020 we issued a warrant to purchase 18,750 shares of common stock to an employee at an exercise price of $1.20 per share. The warrant was valued at $18,571 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, 155%; expected dividend yield, 0%; risk free interest rate, 1.64%; and a life of 3 years. The grant date fair value of each share of common stock underlying the warrant was $0.96.

In April 2020 we issued a warrant to purchase 12,500 shares of common stock to our Chief Executive Officer at an exercise price of $4.00 per share pursuant to an employment agreement. The warrant was valued at $49,693 and has a term of 10 years. We utilized the Black-Scholes model to fair value the warrant received by our Chief Executive Officer with the following assumptions: volatility, 173%; expected dividend yield, 0%; risk free interest rate, 0.68%; and a life of 10 years. The grant date fair value of each share of common stock underlying the warrant was $4.00.

In April 2020 we issued a warrant to purchase 6,250 shares of common stock to our Chief Operating Officer at an exercise price of $4.00 per share pursuant to an employment agreement. The warrant was valued at $24,846 and has a term of 10 years. We utilized the Black-Scholes model to fair value the warrant received by our Chief Operating Officer with the following assumptions: volatility, 173%; expected dividend yield, 0%; risk free interest rate, 0.68%; and a life of 10 years. The grant date fair value of each share of common stock underlying the warrant was $4.00.

In April 2020 we issued a warrant to purchase 6,250 shares of common stock to our Chief Financial Officer at an exercise price of $4.00 per share pursuant to an employment agreement. The warrant was valued at $24,846 and has a term of 10 years. We utilized the Black-Scholes model to fair value the warrant received by our Chief Financial Officer with the following assumptions: volatility, 173%; expected dividend yield, 0%; risk free interest rate, 0.68%; and a life of 10 years. The grant date fair value of each share of common stock underlying the warrant was $4.00.

In April 2020 we issued a warrant to purchase 3,750 shares of common stock to a consultant at an exercise price of $4.00 per share. The warrant was valued at $14,908 and has a term of 10 years. We utilized the Black-Scholes model to fair value the warrant received by the consultant with the following assumptions: volatility, 173%; expected dividend yield, 0%; risk free interest rate, 0.68%; and a life of 10 years. The grant date fair value of each share of common stock underlying the warrant was $4.00.

In August 2020 we issued a warrant to purchase 893 shares of common stock to a consultant at an exercise price of $8.40 per share. The warrant was valued at $6,372 and has a term of 3 years. We utilized the Black-Scholes model to fair value the warrant received by the consultant with the following assumptions: volatility, 166%; expected dividend yield, 0%; risk free interest rate, 0.13%; and a life of 3 years. The grant date fair value of each share of common stock underlying the warrant was $7.13.

In August 2020 we issued a warrant to purchase 595 shares of common stock to a consultant at an exercise price of $8.40 per share. The warrant was valued at $4,249 and has a term of 3 years. We utilized the Black-Scholes model to fair value the warrant received by the consultant with the following assumptions: volatility, 166%; expected dividend yield, 0%; risk free interest rate, 0.13%; and a life of 3 years. The grant date fair value of each share of common stock underlying the warrant was $7.14.

The following table summarizes the outstanding common stock warrants as of September 30, 2020 and December 31, 2019:

		September 30, 2020 (Unaudited)								December 31, 2019
		Number of Warrants				Weighted Average Exercise Price				Number of Warrants				Weighted Average Exercise Price
Outstanding, beginning of period			2,155,065			$	3.12				3,318,826			$	2.72
Granted			210,447				1.36				162,500				0.88
Exercised			(64,296	)			(2.84	)			-				-
Expired			(614,583	)			(6.40	)			(1,326,261	)			(1.84	)
Outstanding, end of period			1,686,633			$	1.73				2,155,065			$	3.12

Warrants outstanding and exercisable by price range as of September 30, 2020 were as follows: 

	Outstanding Warrants												Exercisable Warrants
	Exercise Price				Number				Average Weighted Remaining Contractual Life in Years				Number				Weighted Average Exercise Price
	$	0.64				31,250				3.15				31,250			$	0.64
	$	0.80				158,125				3.01				158,125			$	0.80
	$	0.96				473,958				2.19				473,958			$	0.96
	$	1.12				6,250				3.55				6,250			$	1.12
	$	1.20				175,000				4.13				175,000			$	1.20
	$	1.36				1,250				2.07				1,250			$	1.36
	$	2.16				31,250				1.25				31,250			$	2.16
	$	2.32				523,061				1.41				523,061			$	2.32
	$	2.40				150,000				0.39				150,000			$	2.40
	$	2.56				31,250				1.00				31,250			$	2.56
	$	3.36				31,250				0.75				31,250			$	3.36
	$	4.00				60,000				4.85				60,000			$	4.00
	$	4.40				12,500				0.33				12,500			$	4.40
	$	8.40				1,488				2.88				1,488			$	8.40
						1,686,633				2.11				1,686,633			$	1.73

There were no unvested warrants outstanding as of September 30, 2020.

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- References

No definition available.

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- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(e)(1))
-URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.3-04)
-URI http://asc.fasb.org/extlink&oid=120397183&loc=d3e187085-122770

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-URI http://asc.fasb.org/topic&trid=2208762

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