XML 37 R24.htm IDEA: XBRL DOCUMENT v3.22.1
Note R - Equity
 12 Months Ended
Dec. 31, 2021
Notes to Financial Statements  
Stockholders' Equity Note Disclosure [Text Block]

NOTE R— EQUITY

 

1. Preferred Stock

 

Within the limits and restrictions provided in the Company’s Certificate of Incorporation, the Board of Directors has the authority, without further action by the shareholders, to issue up to 5,000,000 shares of preferred stock, $.0001 par value per share, in one or more series, and to fix, as to any such series, any dividend rate, redemption price, preference on liquidation or dissolution, sinking fund terms, conversion rights, voting rights, and any other preference or special rights and qualifications.

 

2. Common Stock

 

Effective November 20, 2020, the Company implemented a reverse stock split of its outstanding common stock at a ratio of 1-for-8. The number of authorized shares and the par value of the Company's common stock and preferred stock were not affected by the reverse stock split. Stockholders who otherwise would be entitled to receive fractional shares were rounded up to the nearest whole share. The reverse stock split became effective at the opening of trading on November 20, 2020.

 

Holders of common stock have equal rights to receive dividends when, as and if declared by the Board of Directors, out of funds legally available therefor. Holders of common stock have one vote for each share held of record and do not have cumulative voting rights.

 

Holders of common stock are entitled, upon liquidation of the Company, to share ratably in the net assets available for distribution, subject to the rights, if any, of holders of any preferred stock then outstanding. Shares of common stock are not redeemable and have no preemptive or similar rights. All outstanding shares of common stock are fully paid and nonassessable.

 

Issuances of Common Stock

 

On June 18, 2021, the stockholders approved the Employee Stock Purchase Plan. Under the terms of this plan, 789,000 shares of common stock are reserved for issuance to employees and officers of the Company at 85% of the lower of the closing price of the common stock as reported on the Nasdaq Capital Market at the first day or the last day of the offering period. Eligible employees are granted an option to purchase shares under the plan funded by payroll deductions. The Board may suspend or terminate the plan at any time, otherwise the plan expires June 17, 2031. On December 31, 2021, 19,484 shares were issued to employees which resulted in a $10,680 non-cash compensation expense for the Company.

 

On July 23, 2020, the Company completed an underwritten public offering of shares of common stock and warrants resulting in net proceeds of approximately $22.7 million, after deducting underwriting discounts and commissions and estimated offering expenses. 4,264,313 shares of common stock were issued as a result of this offering, and a further 797,038 shares of common stock were issued upon the exercise of 512,500 prefunded warrants and 284,538 warrants exercised in conjunction with the offering.

 

On March 30, 2020, the Company issued 121,500 shares of common stock upon exercise of warrants at $12.00 per share, resulting in proceeds of $1,458,000 to the Company.

 

See Note O Convertible Notes Payable for common stock issuances related to conversion of convertible notes payable and shares of common stock issued for fees in connection with the agreements during fiscal 2020. 

 

Issuances of Restricted Stock

 

Restricted stock consists of shares of common stock that are subject to restrictions on transfer and risk of forfeiture until the fulfillment of specified conditions. The fair value of nonvested shares is determined based on the market price of the Company's common stock on the grant date. Restricted stock is expensed ratably over the term of the restriction period.

 

The Company issued 13,125 shares of restricted common stock to certain employees of the Company and 1,250 of shares of restricted common stock were forfeited during fiscal year 2021. These shares vest in equal annual installments over a three-year period from the date of grant and had a fair value on the date of issuance of $44,025.

 

The Company issued 38,250 and 3,125 shares of restricted common stock in August and November of 2020, respectively to certain employees and directors of the Company. These shares vest in equal annual installments over a three-year period from the date of grant and had a fair value on the date of issuance of $198,900, and $11,250, respectively.

 

Restricted stock compensation for the years ended December 31, 2021 and 2020 was $71,819 and $23,764, respectively.

 

Issuances to Directors, Executive Officers & Consultants

 

During the year ended December 31, 2021, the Company issued 7,828 shares of common stock to its directors in lieu of payment of board fees, valued at $25,536.

 

During the year ended December 31, 2020, the Company issued 5,270 shares of common stock to its directors in lieu of payment of board fees, valued at $28,511.

 

Employees’ exercise options

 

During 2021 and 2020, no employee stock options were exercised.

 

3. Warrants

 

There were no warrants issued during fiscal 2021.

 

Warrants Issued for Services:

 

During the second quarter of 2020, the Company issued a warrant to purchase 15,625 shares of common stock to an investor in payment for a business referral valued at $94,655.

 

During the third quarter of 2020, the Company issued a warrant to purchase 3,125 shares of common stock to a former employee for a business referral valued at $12,921.

 

Warrants Issued with Convertible Notes:

 

See Note O Convertible Notes Payable for warrants issued with convertible notes in connection with the agreements during fiscal 2020.

 

Valuation Assumptions for Warrants:

 

The Company records the warrants at their fair value which is determined using the Black-Scholes valuation model on the date of the grant. The fair value of each warrant was estimated with the following assumptions:

 

  

Year ended

December 31,

 
  

2021

  

2020

 

Weighted average Risk free interest rate

  -

%

  0.33

%

Weighted average price

 $-  $9.25 

Weighted average exercise period

  -   5 

Weighted average Volatility of stock price

  -

%

  110

%

 

The warrant volatility for each issuance is determined based on the review of the experience of the weighted average of historical daily price changes of the Company’s common stock over the expected exercise period. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the years to maturity.

 

A summary of warrant activity is as follows:

 

  

Total

Warrants

  

Weighted

average

exercise

price

  

Weighted

average

remaining

life

(in years)

  

Aggregate

intrinsic

value

 
                 

Outstanding, as of December 31, 2019

  423,559   12.80   3.94   — 

Granted – public offering

  4,264,313   5.20         

Granted – prefunded warrants from the public offering

  512,500   0.08         

Granted – other

  434,375   9.25         

Increase due to trigger of anti-dilution provision feature

  27,244   5.20         

Exercised – public offering

  (284,538

)

  5.20         

Exercised – prefunded warranted from the public offering

  (512,500

)

  0.08         

Exercised – other

  (121,500

)

  12.00         

Forfeited

  —   —         

Expired

  (54,066

)

  6.86         

Outstanding, as of December 31, 2020

  4,689,387   6.04   4.48   — 

Granted

  —   —         

Exercised

  —   —         

Forfeited

  —   —         

Expired

  —   —         

Outstanding, as of December 31, 2021

  4,689,387   6.04   3.48   — 

 

The aggregate intrinsic value in the table above represents the total intrinsic value, based on the Company’s closing stock price of $2.21, $3.52 and $4.00 as of December 31, 2021, 2020 and 2019, respectively, which would have been received by the warrant holders had all warrant holders exercised their options as of that date. There were no in-the-money warrants exercisable as of December 31, 2021, 2020 and 2019.

 

4.  Securities Purchase Agreement dated September 23, 2015

 

On September 23, 2015, the Company issued warrants (the “2015 Warrants”) to purchase 8,681 shares of common stock in connection with the issuance of a promissory note. The warrants were immediately exercisable at an initial exercise price of $28.80 per share and had a term of five years.  The 2015 Warrants expired in September 2020.

 

The 2015 Warrants had a “full ratchet” anti-dilution adjustment provision.  The anti-dilution adjustment provision was triggered in the first quarter of 2020 from the February 2020 Note and amendments to the Original Note. As a result of the forgoing transactions, the number of shares of common stock issuable upon the full exercise of the 2015 Warrants increased to 48,078, the exercise price was reduced to $5.20 per share, and the Company recorded a non-cash deemed dividend in amount of $41,688.