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SHAREHOLDERS EQUITY | 12 Months Ended
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Dec. 31, 2022
Shareholders' Equity: |
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 December 31, 2022 and 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 December 31, 2022 and 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 December 31, 2022 and 2021:
|  | December 31, 2022 |  |  | 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 |  |  | $ | 1.65 |  |  |  | 143,000 |  |  | $ | 2.66 |
Options outstanding and exercisable by price range as of December 31, 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 |  |  |  | 2.20 |  |  |  | 27,500 |  |  | $ | 0.80 |
$ | 0.88 |  |  |  | 31,250 |  |  |  | 1.01 |  |  |  | 31,250 |  |  | $ | 0.88 |
$ | 0.96 |  |  |  | 25,000 |  |  |  | 1.02 |  |  |  | 25,000 |  |  | $ | 0.96 |
$ | 1.12 |  |  |  | 270,000 |  |  |  | 9.06 |  |  |  | 270,000 |  |  | $ | 1.12 |
$ | 1.93 |  |  |  | 10,500 |  |  |  | 4.06 |  |  |  | 10,500 |  |  | $ | 1.93 |
$ | 2.16 |  |  |  | 5,000 |  |  |  | 2.00 |  |  |  | 5,000 |  |  | $ | 2.16 |
$ | 4.40 |  |  |  | 12,500 |  |  |  | 3.05 |  |  |  | 12,500 |  |  | $ | 4.40 |
$ | 7.06 |  |  |  | 31,250 |  |  |  | 2.75 |  |  |  | 31,250 |  |  | $ | 7.06 |
|  |  |  |  | 413,000 |  |  |  | 6.63 |  |  |  | 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 year ended December 31, 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. In November 2022, we modified the terms of Dr. Halden S. Shane's, TOMI's Chief Executive Officer and a director on TOMI's board of directors, outstanding warrants to purchase 593,750 shares of common stock. The terms of the warrants were increased by 10 years. Pursuant to ASC 718, the modified terms of the warrants resulted in approximately $356,000 in incremental equity compensation expense for the year ended December 31, 2022. We utilized the Black-Scholes method to fair value the warrants under the original and modified terms with the following range of assumptions: volatility, 83%-163%; expected dividend yield, 0%; risk free interest rate, 4.31%; and a life of 0.12 - 11.23 years, respectively. The grant date fair value range of each share of common stock underlying the warrant was $0.17 through $0.65. The following table summarizes the outstanding common stock warrants as of December 31, 2022 and 2021:
|  | December 31, 2022 |  |  | 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 |  |  | (557,436 | ) |  |  | (2.23 | ) |  |  | (262,500 | ) |  |  | (2.65 | )
Outstanding, end of period |  |  | 2,792,335 |  |  | $ | 2.25 |  |  |  | 3,381,021 |  |  | $ | 2.22 |
Warrants outstanding and exercisable by price range as of December 31, 2022 were as follows:
Outstanding Warrants |  |  | Average Weighted |  |  | Exercisable Warrants |
Exercise Price |  |  | Number |  |  | Remaining Contractual Life in Years |  |  | Number |  |  | Weighted Average Exercise Price |
$ | 0.64 |  |  |  | 31,250 |  |  |  | 10.89 |  |  |  | 31,250 |  |  | $ | 0.64 |
$ | 0.80 |  |  |  | 125,000 |  |  |  | 11.08 |  |  |  | 125,000 |  |  | $ | 0.80 |
$ | 0.96 |  |  |  | 442,708 |  |  |  | 9.98 |  |  |  | 442,708 |  |  | $ | 0.96 |
$ | 1.12 |  |  |  | 6,250 |  |  |  | 1.30 |  |  |  | 6,250 |  |  | $ | 1.12 |
$ | 1.20 |  |  |  | 175,000 |  |  |  | 1.88 |  |  |  | 175,000 |  |  | $ | 1.20 |
$ | 1.68 |  |  |  | 1,434,721 |  |  |  | 3.75 |  |  |  | 1,434,721 |  |  | $ | 1.68 |
$ | 2.18 |  |  |  | 172,167 |  |  |  | 3.75 |  |  |  | 172,167 |  |  | $ | 2.18 |
$ | 4.00 |  |  |  | 28,750 |  |  |  | 7.32 |  |  |  | 28,750 |  |  | $ | 4.00 |
$ | 6.95 |  |  |  | 375,000 |  |  |  | 7.75 |  |  |  | 375,000 |  |  | $ | 6.95 |
$ | 8.40 |  |  |  | 1,489 |  |  |  | 0.63 |  |  |  | 1,489 |  |  | $ | 8.40 |
|  |  |  |  | 2,792,335 |  |  |  | 5.58 |  |  |  | 2,792,335 |  |  | $ | 2.25 |
There were no unvested warrants outstanding as of December 31, 2022.

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