Quarterly report pursuant to Section 13 or 15(d)

STOCK WARRANTS, STOCK OPTIONS AND RESTRICTED STOCK UNITS

v3.22.2.2
STOCK WARRANTS, STOCK OPTIONS AND RESTRICTED STOCK UNITS
6 Months Ended
Jun. 30, 2022
STOCK WARRANTS, STOCK OPTIONS AND RESTRICTED STOCK UNITS  
STOCK WARRANTS, STOCK OPTIONS AND RESTRICTED STOCK UNITS

NOTE 13. STOCK WARRANTS, STOCK OPTIONS AND RESTRICTED STOCK UNITS

 

The Company accounts for share-based compensation stock options and restricted stock units, and non-employee stock warrants under ASC 718, whereby costs are recorded based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable, utilizing the Black-Scholes pricing model for stock options and warrants, and the closing price of our common stock on the grant date for restricted stock units. Unless otherwise provided for, the Company covers equity instrument exercises by issuing new shares. 

 

Stock Warrants

 

During March, April and May 2021, the Company issued through the Offering convertible notes payable with warrants, (see Note 9), to purchase up to 334,167 shares of our common stock at an exercise price of $9 per share. The warrants expire two years after the date of issuance.

 

On September 28, 2021 and March 30, 2022 the Company issued through the sale of the Debenture Original Warrants and New Warrants, (see Note 8), to purchase up to 406,504 and 101,626, respectively, shares of our common stock at an exercise price of $6 per share. The warrants expire seven years after the date of issuance.

 

On May 18, 2022, the Company issued through an underwritten public offering 4,705,884 warrants (the “Offering Warrants”), 424,116 Underwriter Warrants, and 141,177 Representative Warrants to purchase common stock of the Company at exercise prices of $4.25, $4.25 and $5.3125, respectively. The Offering Warrants and Underwriter Warrants expire five years from the date of issuance and were valued using the Monte Carlo simulation option pricing model. The Representative Warrants expire five years from the date of issuance and were valued using the Black-Scholes pricing model. The aggregate fair value of the Offering Warrants, Underwriter Warrants and Representative Warrants at June 30, 2022 are approximately $5,700,000.

 

The total outstanding balance of all stock warrants in the Company is 6,209,267 and 836,464 at June 30, 2022 and December 31 2021, respectively. There were 5,372,803 detached free-standing stock warrants granted during the six-month period ended June 30, 2022, and 334,167 detached free-standing stock warrants granted during the six-month period ended June 30, 2021. The fair value of these non-employee stock warrants granted during the six-month periods ended June 30, 2022 and 2021 totaled $6,441,108 and $1,092,708, respectively, and were determined using the Monte Carlo simulation and Black-Scholes option pricing models based on the following assumptions:

 

 

 

June 30,

2022

 

 

June 30,

2021

 

Exercise Price 

 

$ 4.25-6.00

 

 

$ 9.00

 

Dividend Yield 

 

 

0 %

 

 

0 %

Volatility 

 

110–160

%

 

 

158 %

Risk-free Interest Rate 

 

 

2.45-2.89

%

 

 

0.14 %

Life of Warrants

 

5 – 7 Years

 

 

2 Years

 

The following table summarizes the changes in the Company’s outstanding warrants during the six-month periods ended June 30, 2022 and 2021:

 

 

 

Warrants

Outstanding

Number of

Shares

 

 

Exercise Price Per

Share

 

 

Weighted Average Remaining Contractual Life

 

Weighted Average

Exercise Price Per Share

 

 

Aggregate Intrinsic Value

 

Balance at December 31, 2020

 

 

194,772

 

 

$ 1.50– 6.00

 

 

3.80 Years

 

$ 2.82

 

 

$ 1,173,737

 

Warrants Granted

 

 

334,167

 

 

$ 9.00

 

 

1.79 Years

 

$ 9.00

 

 

$ 952,375

 

Warrants Exercised

 

 

(58,979 )

 

$ 1.50

 

 

 

 

$ 1.50

 

 

 

 

 

Warrants Expired  

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2021

 

 

469,960

 

 

$ 1.50– 9.00

 

 

2.52 Years

 

$ 7.38

 

 

$ 2,099,093

 

 

 

 

Warrants

Outstanding

Number of

Shares

 

 

Exercise Price Per

Share

 

 

Weighted Average Remaining Contractual Life

 

Weighted Average

Exercise Price Per Share

 

 

Aggregate Intrinsic Value

 

Balance at December 31, 2021

 

 

836,464

 

 

$ 1.50– 9.00

 

 

3.04 Years

 

$ 6.78

 

 

$ 1,784,838

 

Warrants Granted

 

 

5,372,803

 

 

$ 4.25– 6.00

 

 

4.92 Years

 

$ 4.31

 

 

$ -

 

Warrants Exercised

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants Expired/Forfeited  

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2022

 

 

6,209,267

 

 

$ 1.50– 9.00

 

 

4.74 Years

 

$ 4.64

 

 

$ -

 

 

Share-Based Compensation

 

On October 24, 2019, the Company’s 2019 Equity Incentive Plan (the “Plan”) went effective authorizing 1,282,823 shares of Company common stock for issuance as stock options and restricted stock units (“RSUs”) to employees, directors or consultants. The Plan was approved by the Company’s Board of Directors and the holders of a majority of the Company’s voting stock on September 9, 2019. In January 2022, the stockholders ratified a further authorization of shares of common stock for a total of 1,733,333 shares subject to the Plan.

 

The Company generally recognizes share-based compensation expense on the grant date and over the period of vesting or period that services will be provided.

 

Stock Options

 

As of June 30, 2022 and December 31, 2021, the Company has granted stock options to acquire 1,106,587 and 1,036,588 shares of common stock under the plan, respectively. As of June 30, 2022, the plan has 846,269 vested options and 277,087 non-vested options. As of December 31, 2021, the plan had 618,841 vested shares and 417,747 non-vested shares. The stock options are held by our officers, directors, employees, and certain key consultants. 

 

In total for the six-months ended June 30, 2022 and 2021, the Company recorded in general and administrative expense $926,456 and $243,023, respectively, of share-based compensation expense related to stock options. The unrecognized compensation expense as of June 30, 2022, was approximately $1,707,554 for non-vested share-based awards to be recognized over periods of approximately four months to two years and seven months.

In applying the Black-Scholes options pricing model, assumptions used to compute the fair value of the stock options granted during the six-month periods ended June 30, 2022 and 2021 were as follows:

 

 

 

June 30,

 2022

 

 

June 30,

2021

 

Exercise Price 

 

$

8.2500 – 9.0750

 

 

$ 8.3100

 

Dividend Yield 

 

 

0 %

 

 

0 %

Volatility 

 

 

191% - 192%

%

 

152%-158

%

Risk-free Interest Rate 

 

 

 0.78% - 1.52

%

 

0.27%-0.34

%

Life of Options

 

 2 – 3 Years

 

 

 2 – 5 Years

 

 

The following table summarizes the changes in the Company’s outstanding stock options during the six-month periods ended June 30, 2022 and 2021:

 

 

 

Options

Outstanding

Number of

Shares

 

 

Exercise Price Per

Share

 

 

Weighted Average Remaining Contractual Life

 

Weighted Average

Exercise Price Per Share

 

 

Aggregate Intrinsic Value

 

Balance at December 31, 2020

 

 

857,409

 

 

$

0.7902 – 9.9000

 

 

7.45 Years

 

$ 1.4997

 

 

$ 6,302,277

 

Options Granted

 

 

129,167

 

 

 

8.3160 – 10.1310

 

 

2.94 Years

 

 

9.8562

 

 

 

257,540

 

Options Exercised

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options Cancelled

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options Expired/Forfeited  

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2021

 

 

986,576

 

 

$

0.7902 – 10.1310

 

 

7.21 Years

 

$ 2.5938

 

 

$ 9,132,060

 

 

 

 

Options

Outstanding

Number of

Shares

 

 

Exercise Price Per

Share

 

 

Weighted Average Remaining Contractual Life

 

Weighted Average

Exercise Price Per Share

 

 

Aggregate Intrinsic Value

 

Balance at December 31, 2021

 

 

1,053,356

 

 

$

0.7903 – 10.74

 

 

6.21 Years

 

$ 3.3900

 

 

$ 5,804,517

 

Options Granted

 

 

70,000

 

 

$

8.25 – 9.0750

 

 

1.58 Years

 

$ 8.2893

 

 

$ -

 

Options Exercised

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options Cancelled

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options Expired/Forfeited  

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2022

 

 

1,123,356

 

 

$

0.7903 – 10.7250

 

 

5.46 Years

 

$ 3.7042

 

 

$ -

 

 

 

Options

Outstanding

Number of

Shares

 

 

Exercise Price Per

Share

 

 

Weighted Average Remaining Contractual Life

 

Weighted Average

Exercise Price Per Share

 

 

Aggregate Intrinsic Value

 

Exercisable at December 31, 2021

 

 

635,609

 

 

$

0.7903 - 10.7400

 

 

6.70 Years

 

$ 1.5861

 

 

$ 4,655,089

 

Exercisable at June 30, 2022           

 

 

846,269

 

 

$

0.7903 – 10.7250

 

 

6.45 Years

 

$ 2.5032

 

 

$ -

 

 

Restricted Stock Units

 

The Plan provides for the grant of RSUs.  RSUs are settled in shares of the Company’s common stock as the RSUs become vested. In January and February 2022, the Company granted 16,667 service based RSUs to an executive officer and 25,000 service based RSUs to a director, respectively. All RSUs granted in 2022 vest the earlier of the expiration of any lock-up period that includes the securities of the Company owned by the Plan participant after the up list of the Company to a national exchange or January 1, 2023.  On January 12, 2022, 16,667 shares of the Company’s common stock were issued for the RSUs vested during 2021. On June 8, 2022, 16,666 shares of the Company’s common stock were issued to a consultant for RSUs vested in May 2022.

 

The following table summarizes RSU activity under the Plan for the six-month periods ended June 30, 2022 and 2021:

 

 

 

RSUs

 

 

Weighted Average

Grant Date Fair Value Per Share

 

 

Weighted Average

Vesting Period

 

Unvested at December 31, 2020

 

 

71,667

 

 

$ 8.7460

 

 

1.70 Years

 

Granted

 

 

3,333

 

 

 

9.2100

 

 

1.50 Years

 

Vested

 

 

-

 

 

 

 

 

 

 

 

Unvested at June 30, 2021

 

 

75,000

 

 

$ 8.7667

 

 

1.21 Years

 

 

 

 

RSUs

 

 

Weighted Average

Grant Date Fair Value Per Share

 

 

Weighted Average

Vesting Period

 

Unvested at December 31, 2021

 

 

133,585

 

 

$ 8.56

 

 

0.97 Years

 

Granted

 

 

41,667

 

 

 

6.92

 

 

0.52 Years

 

Vested

 

 

(16,667 )

 

 

7.50

 

 

 

 

Unvested at June 30, 2022

 

 

158,585

 

 

$ 8.17

 

 

0.49 Years

 

 

In total for the six-months ended June 30, 2022 and 2021, the Company recorded in general and administrative expense $751,607 and $102,297, respectively, of share-based compensation expense related to RSU’s. As of June 30, 2022, total estimated compensation costs of RSUs granted and outstanding but not yet vested was $515,941 which is expected to be recognized over the weighted average period of six-months.

Executive Officers Stock Options and RSUs

 

The Company has 387,404 and 823,482 outstanding executive officers stock options exercisable at $0.7902 to $10.1400 and $0.7902 to $10.1400 per share as of June 30, 2022 and December 31, 2021, respectively.  The Company has 57,626 and 61,919 unvested RSUs granted to executive officers as of June 30, 2022 and December 31, 2021, respectively.