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SHAREHOLDERS EQUITY
 9 Months Ended
Sep. 30, 2022
Shareholders' Equity:  
NOTE 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.

 

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, 2022 and December 31, 2021, 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, 2022 and December 31, 2021, 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 2021, we issued 50,000 shares of common stock valued at approximately $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 to purchase common stock 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 have an exercise price of $1.68 per share, are exercisable immediately upon issuance and have a term of 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 per share.

 

In January 2022, we issued 51,750 shares of common stock valued at approximately $54,000 to members of our Board pursuant to our equity plan (see Note 12).

 

Stock Options

 

In January 2022 we issued an option to purchase 172,500 shares of common stock to our Chief Executive Officer at an exercise price of $1.12 per share pursuant to an employment agreement. The option was valued at $178,281 and has a contractual 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, 156%; expected dividend yield, 0%; risk free interest rate, 1.65%; and an expected life of 5 years. The grant date fair value of each share of common stock underlying the warrant was $1.03.

 

In January 2022 we issued an option to purchase 57,500 shares of common stock to our Chief Operating Officer at an exercise price of $1.12 per share pursuant to an employment agreement. The option was valued at $59,427 and has a contractual 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, 156%; expected dividend yield, 0%; risk free interest rate, 1.65%; and an expected life of 5 years. The grant date fair value of each share of common stock underlying the warrant was $1.03.

 

In January 2022 we issued an option to purchase 40,000 shares of common stock to our Chief Financial Officer at an exercise price of $1.12 per share pursuant to an employment agreement. The option was valued at $41,340 and has a contractual 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, 156%; expected dividend yield, 0%; risk free interest rate, 1.65%; and an expected life of 5 years. The grant date fair value of each share of common stock underlying the warrant was $1.03.

 

The following table summarizes stock options outstanding as of September 30, 2022 and December 31, 2021:

 

 

 

September 30, 2022

 

 

 

 

 

 

 

(Unaudited)

 

 

 

December 31, 2021

 

 

 

Number of

Options

 

 

Weighted Average Exercise Price

 

 

Number of

Options

 

 

Weighted Average Exercise Price

 

Outstanding, beginning of period

 

 

143,000

 

 

$2.66

 

 

 

132,500

 

 

$2.72

 

Granted

 

 

270,000

 

 

 

1.12

 

 

 

10,500

 

 

 

1.93

 

Exercised

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Expired

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Outstanding, end of period

 

 

413,000

 

 

$1.70

 

 

 

143,000

 

 

$2.66

 

Options outstanding and exercisable by price range as of September 30, 2022 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

 

 

 

2.45

 

 

 

27,500

 

 

$0.80

 

$

0.88

 

 

 

31,250

 

 

 

1.26

 

 

 

31,250

 

 

$0.88

 

$

0.96

 

 

 

25,000

 

 

 

1.27

 

 

 

25,000

 

 

$0.96

 

$

1.12

 

 

 

270,000

 

 

 

9.31

 

 

 

270,000

 

 

$1.12

 

$

1.93

 

 

 

10,500

 

 

 

4.31

 

 

 

10,500

 

 

$1.93

 

$

2.16

 

 

 

5,000

 

 

 

2.25

 

 

 

5,000

 

 

$2.16

 

$

4.40

 

 

 

12,500

 

 

 

3.30

 

 

 

12,500

 

 

$4.40

 

$

7.06

 

 

 

31,250

 

 

 

3.00

 

 

 

31,250

 

 

$7.06

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

413,000

 

 

 

6.88

 

 

 

413,000

 

 

$1.65

 

 

Stock Warrants

 

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 June 30, 2021.

 

The following table summarizes the outstanding common stock warrants as of September 30, 2022 and December 31, 2021:

 

 

 

September 30, 2022

(Unaudited)

 

 

December 31, 2021

 

 

 

(Unaudited)

 

 

Weighted Average Exercise Price

 

 

Number of Warrants

 

 

Weighted Average Exercise Price

 

Outstanding, beginning of period

 

 

3,381,021

 

 

$2.22

 

 

 

2,049,133

 

 

$2.55

 

Granted

 

 

-

 

 

 

-

 

 

 

1,606,888

 

 

 

1.73

 

Exercised

 

 

(31,250)

 

 

(0.21)

 

 

-

 

 

 

-

 

Expired

 

 

(556,186)

 

 

(2.24)

 

 

(262,500)

 

 

(2.65)

Outstanding, end of period

 

 

2,793,585

 

 

$2.23

 

 

 

3,381,021

 

 

$2.22

 

Warrants outstanding and exercisable by price range as of September 30, 2022 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

 

 

 

1.25

 

 

 

31,250

 

 

$0.64

 

$

0.80

 

 

 

125,000

 

 

 

1.01

 

 

 

125,000

 

 

$0.80

 

$

0.96

 

 

 

442,708

 

 

 

0.19

 

 

 

442,708

 

 

$0.96

 

$

1.12

 

 

 

6,250

 

 

 

1.65

 

 

 

6,250

 

 

$1.12

 

$

1.20

 

 

 

175,000

 

 

 

2.13

 

 

 

175,000

 

 

$1.20

 

$

1.36

 

 

 

1,250

 

 

 

0.07

 

 

 

1,250

 

 

$1.36

 

$

1.68

 

 

 

1,434,721

 

 

 

4.00

 

 

 

1,434,721

 

 

$1.68

 

$

2.18

 

 

 

172,167

 

 

 

4.00

 

 

 

172,167

 

 

$2.18

 

$

4.00

 

 

 

28,750

 

 

 

7.57

 

 

 

28,750

 

 

$4.00

 

$

6.95

 

 

 

375,000

 

 

 

8.00

 

 

 

375,000

 

 

$6.95

 

$

8.40

 

 

 

1,489

 

 

 

0.88

 

 

 

1,489

 

 

$8.40

 

 

 

 

 

 

2,793,585

 

 

 

2.91

 

 

 

2,793,585

 

 

$2.23

 

 

There were no unvested warrants outstanding as of September 30, 2022.