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SHAREHOLDERS' EQUITY
 9 Months Ended
Sep. 30, 2021
Shareholders' Equity:  
10. SHAREHOLDERS' EQUITY

NOTE 10. 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 September 10, 2020.  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, 2021 and December 31, 2020, 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, 2021 and December 31, 2020, 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

 

In January 2020, we issued 50,000 shares of fully vested common stock valued at $48,000 to members of our Board (see Note 12). 

 

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.

 

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

 

In January 2021, we issued 50,000 shares of common stock valued at $228,000 to members of our Board (see Note 12). 

 

In September 2021, we sold 2,869,442 shares of common stock through a registered direct offering and issued 1,434,721 warrants in a concurrent private placement.  We received net proceeds from the transaction of $4,581,651, after deducting the placement agent’s fees and other estimated offering expenses. The Warrants are exercisable at an exercise price of $1.68 per share, are exercisable immediately upon issuance and have a term of exercise equal to five years from the date of issuance.  In addition, we issued 172,167 warrants to the placement agent which have a term of five years and an exercise price of $2.18. 

 

Stock Options

 

There were no options granted for the nine months ended September 30, 2021.

 

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 in satisfaction of accrued compensation. 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, 2021 and December 31, 2020:

 

 

 

September 30, 2021

(Unaudited)

 

 

December 31, 2020

 

 

 

Number of Options

 

 

Weighted Average Exercise Price

 

 

Number of Options

 

 

Weighted Average Exercise Price

 

Outstanding, beginning of period

 

 

132,500

 

 

$2.72

 

 

 

77,500

 

 

$2.56

 

Granted

 

 

-

 

 

 

-

 

 

 

62,500

 

 

 

3.96

 

Exercised

 

 

-

 

 

 

-

 

 

 

(2,500)

 

 

0.40

 

Expired

 

 

-

 

 

 

-

 

 

 

(5,000)

 

 

16.80

 

Outstanding, end of period

 

 

132,500

 

 

$2.72

 

 

 

132,500

 

 

$2.72

 

 

Options outstanding and exercisable by price range as of September 30, 2021 were as follows:

 

Outstanding Options

 

 

Average Weighted Remaining Contractual

 

 

Exercisable Options

 

Range

 

 

Number

 

 

Life in Years

 

 

Number

 

 

Weighted Average Exercise Price

 

$

0.80

 

 

 

27,500

 

 

 

3.45

 

 

 

27,500

 

 

$0.80

 

$

0.88

 

 

 

31,250

 

 

 

2.26

 

 

 

31,250

 

 

$0.88

 

$

0.96

 

 

 

25,000

 

 

 

2.27

 

 

 

25,000

 

 

$0.96

 

$

2.16

 

 

 

5,000

 

 

 

3.25

 

 

 

5,000

 

 

$2.16

 

$

4.40

 

 

 

12,500

 

 

 

4.35

 

 

 

12,500

 

 

$4.40

 

$

7.06

 

 

 

31,250

 

 

 

4.00

 

 

 

31,250

 

 

$7.06

 

 

 

 

 

 

132,500

 

 

 

3.14

 

 

 

132,500

 

 

$2.72

 

 

Stock Warrants

 

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 in satisfaction of accrued compensation. 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 the CEO 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 the CEO 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 purchase6,250 shares of common stock to the COO 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 the COO 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 the CFO 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 the CFO 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.

 

On February 11, 2021, we agreed to amend (the “Warrant Amendment”) the warrant to purchase 125,000 shares of TOMI common stock, par value $0.01 (the “Common Stock”), issued by TOMI to Dr. Halden S. Shane, TOMI’s Chief Executive Officer and a director on TOMI’s board of directors, on February 11, 2014 (the “Warrant”), to provide TOMI an option to repurchase the Warrant from Dr. Shane at a negotiated price. In connection with the Warrant Amendment, TOMI repurchased the warrant from Dr. Shane (the “Repurchase”) for an aggregate cash consideration of $314,500, representing a 15% discount of the net exercise cash value of the Warrant, which was calculated using the closing price of the Common Stock on the Nasdaq on February 11, 2021 of $5.36, less the exercise price of the warrants in the amount of $2.40. On the same date, the Warrant Amendment and the Repurchase was considered, approved and adopted by a disinterested majority of TOMI’s board of directors.  The $314,500 charge in connection with the warrant amendment has been included in General and Administrative expenses for the nine months ended September 30, 2021.

 

In September 2021, we issued 1,434,721 warrants in a private placement in connection with the sale common stock through a registered direct offering.  The Warrants are exercisable at an exercise price of $1.68 per share, are exercisable immediately upon issuance and have a term of exercise equal to five years from the date of issuance.  In addition, we issued 172,167 warrants to the placement agent which have a term of five years and an exercise price of $2.18.

 

The following table summarizes the outstanding common stock warrants as of September 30, 2021 and December 31, 2020:

 

 

 

September 30, 2021

(Unaudited)

 

 

December 31, 2020

 

 

 

Number of Warrants

 

 

Weighted Average Exercise Price

 

 

Number of Warrants

 

 

Weighted Average Exercise Price

 

Outstanding, beginning of period

 

 

2,049,133

 

 

$2.55

 

 

 

2,155,065

 

 

$3.12

 

Granted

 

 

1,606,888

 

 

 

1.73

 

 

 

585,447

 

 

 

4.97

 

Exercised

 

 

-

 

 

 

-

 

 

 

(76,796)

 

 

(2.77)

Expired 

 

 

(231,250)

 

 

(2.88)

 

 

(614,583)

 

 

(6.40)

Outstanding, end of period

 

 

3,424,771

 

 

$2.22

 

 

 

2,049,133

 

 

$2.55

 

 

Warrants outstanding and exercisable by price range as of September 30, 2021 were as follows: 

 

Outstanding Warrants

Average Weighted

Remaining Contractual

Exercisable Warrants

Exercise Price

Number

Life in Years

Number

Weighted Average Exercise Price

$

0.64

31,2502.1531,250$0.64
$

0.80

158,1252.01

 

 

 

158,125

 

 

$0.80

 

$

0.96

 

 

 

473,958

 

 

 

1.19

 

 

 

473,958

 

 

$0.96

 

$

1.12

 

 

 

6,250

 

 

 

2.55

 

 

 

6,250

 

 

$1.12

 

$

1.20

 

 

 

175,000

 

 

 

3.13

 

 

 

175,000

 

 

$1.20

 

$

1.36

 

 

 

1,250

 

 

 

1.07

 

 

 

1,250

 

 

$1.36

 

$

1.68

 

 

 

1,434,721

 

 

 

5.00

 

 

 

1,434,721

 

 

$1.68

 

$

2.16

 

 

 

31,250

 

 

 

0.25

 

 

 

31,250

 

 

$2.16

 

$

2.18

 

 

 

172,167

 

 

 

5.00

 

 

 

172,167

 

 

$2.18

 

$

2.32

 

 

 

523,061

 

 

 

0.42

 

 

 

523,061

 

 

$2.32

 

$

2.40

 

 

 

12,500

 

 

 

0.01

 

 

 

12,500

 

 

$2.40

 

$

4.00

 

 

 

28,750

 

 

 

8.57

 

 

 

28,750

 

 

$4.00

 

$

6.95

 

 

 

375,000

 

 

 

9.00

 

 

 

375,000

 

 

$6.95

 

$

8.40

 

 

 

1,488

 

 

 

1.88

 

 

 

1,488

 

 

$8.40

 

 

 

 

 

 

3,424,771

 

 

 

3.91

 

 

 

3,424,771

 

 

$2.65

 

 

There were no unvested warrants outstanding as of September 30, 2021.