The Company’s amended and restated certificate of incorporation filed on December 14, 2017, authorizes the Company to issue 10,000,000 shares of preferred stock and 50,000,000 shares of common stock.

The voting, dividend and liquidation rights of the holders of the common stock are subject to rights of preferred stockholders, if any, as designated by the Board of Directors. Common stockholders have voting rights at all meetings of stockholders and are entitled to one vote for each share held subject to certain limitations otherwise required by law. Dividends may be declared and paid on the common stock as and when determined by the Board of Directors subject to any preferential dividend or other rights of preferred stockholders. The Company does not anticipate declaring any dividends in the foreseeable future. Upon the dissolution or liquidation of the Company, common stockholders are entitled to receive all assets of the Company, subject to any preferential or other rights of preferred stockholders.

Preferred Stock may be issued from time to time in one or more series, each of these series to have such terms as stated or expressed in resolutions providing for the issue of such series adopted by the Board of Directors. There is no outstanding preferred stock.

Regarding unissued preferred stock, the Board of Directors is authorized to determine or alter any or all of the rights, preferences, privileges and restrictions granted to or imposed upon wholly unissued series of preferred stock, and to fix or alter the number of shares comprising any such series and the designation thereof, or any of them, and to provide for rights and terms of redemption or conversion of the shares of any such series.

The Company maintained a stock option plan that was established in 2000 (“2000 Plan”). In November 2008, the Company increased the maximum number of shares of the Company's common stock that were issuable under the 2000 Plan to 3,000,000 shares of the Company's common stock. The 2000 Plan has expired, and no future grants may be awarded under the 2000 Plan.

In December 2011, the Company adopted a stock option plan (“2011 Plan”) under which the Company may issue up to 1,500,000 shares of the Company’s common stock and, as of December 31, 2020, the Company had 240,000 shares of common stock remaining unissued under the 2011 Plan. The 2011 Plan was terminated by the Board of Directors on October 10, 2017, and accordingly, no shares are available for issuance under the 2011 Plan. The 2011 Plan will continue to govern outstanding awards granted thereunder.

In December 2015, the Company adopted a stock option plan (“2015 Plan”) under which the Company may issue up to 1,500,000 shares of the Company’s common stock and, as of December 31, 2020, the Company had 790,000 shares of common stock remaining unissued under the 2015 Plan. The 2015 Plan was terminated by the Board of Directors on October 10, 2017, and accordingly, no shares are available for issuance under the 2015 Plan. The 2015 Plan will continue to govern outstanding awards granted thereunder.

The terms of the 2011 Plan and 2015 Plan provided for the grant of incentive options to employees and non-statutory options to employees, directors and consultants of the Company.

The Board of Directors adopted the 2017 Equity Incentive Plan on October 10, 2017 (the “2017 Plan”). The 2017 Plan allows for the grant of a variety of equity vehicles to provide flexibility in implementing equity awards, including incentive stock options, non-qualified stock options, restricted stock grants, unrestricted stock grants and restricted stock units and stock bonuses and performance-based awards. On December 18, 2017, the Company stockholders approved the “2017 Plan” under which the Company may issue up to 1,500,000 shares of the Company’s common stock. The Company has 26,235 shares of common stock remaining unissued under the 2017 Plan.

The exercise price per share for options under the 2011 Plan, 2015 Plan and 2017 Plan is determined by the Company’s Board of Directors, for incentive stock options the exercise price shall not be less than the fair market value of the Company's common stock on the date of grant, except that for incentive options granted to an owner/employee with a greater than 10% ownership interest in the Company, the exercise price shall not be less than 110% of the fair market value of the Company's common stock on the date of grant.

Options under the plans expire no more than ten years after the date of grant and/or within five years after the date of the grant for incentive options granted to an owner/employee with a greater than 10% ownership interest in the Company.

Effective June 24, 2020, the Company entered into an employment agreement with Mr. Raun to serve as the Company’s president and chief executive officer. Pursuant to the terms of the employment agreement, Mr. Raun is entitled to receive 412,125 restricted stock units (“RSUs”) that shall vest over three years, with one third of the RSUs vesting following the one-year anniversary of the date of grant, and the remaining RSUs vesting in four equal installments, commencing six months after the one-year anniversary of the date of grant and every six months thereafter until fully vested; and 412,125 Incentive Stock Options (“ISOs”) pursuant to the Company’s 2017 Equity Incentive Plan, whereby the exercise price for the ISOs shall be no less than the fair market value of the Company’s common stock at the date of grant, ($2.14).

The ISOs shall vest at the end of each the second and fourth quarters, the price of the Company’s common stock as of the end of quarter two or quarter four, as applicable, shall be determined using the ten-day trailing volume weighted average price (“VWAP”) after reporting of quarter two and quarter four earnings, as applicable. The date of each such determination shall be referred to as a “Determination Date.” If on any Determination Date the Company’s stock price has increased from the prior Determination Date, then a portion of the ISOs shall become vested. The number of ISOs that shall become vested on a Determinate Date is determined as follows: ((Price at Determination Date – Price at prior Determination Date) x 100) * 1,177.52 = Vested ISOs. If on any Determination Date the Company’s stock price is $5.50 per share, all ISOs shall immediately become vested.

In the event that Mr. Raun’s employment agreement is terminated for a reason other than “good cause” or for “good reason”, Mr. Raun, upon executing an effective waiver and release of claims, unvested RSUs shall accelerate so that an additional twelve (12) months of RSUs shall vest from the termination date.

A summary of stock option activity under the plans during the years ended December 31, 2020 and 2019 are as follows:

	Stock Options Outstanding
	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding at January 1, 2019		2,018,747		$	1.13		4.08	$	2,013,516
Granted		106,000		$	2.14
Forfeited / Canceled		(62,000	)	$	2.04
Exercised		(376,303	)	$	0.46
Outstanding at December 31, 2019		1,686,444		$	1.13		4.84	$	2,013,516
Granted		432,125		$	2.17
Forfeited / Canceled		(38,197	)	$	2.32
Exercised		(760,105	)	$	0.88
Outstanding at December 31, 2020		1,320,267		$	1.81		6.43	$	2,889,274
Exercisable at December 31, 2020		842,871		$	1.56		4.81	$	2,060,542
Vested and expected to vest at December 31, 2020		1,305,945		$	1.81		6.40	$	2,864,412

The following table summarizes information about common stock options outstanding as of December 31, 2020:

		Stock Options Outstanding						Stock Options Exercisable
Plan	Exercise Price Range	Number of Shares Outstanding		Weighted Average Remaining Contractual Life (in years)		Weighted Average Exercise Price		Number of Shares Exercisable		Weighted Average Remaining Contractual Life (in years)		Weighted Average Exercise Price
2011	$0.46-$0.80		309,895		2.15	$	0.63		309,895		2.15	$	0.63
2015	$1.78-$1.95		424,610		6.00	$	1.74		423,881		6.00	$	1.74
2017	$2.14-$4.09		585,762		9.01	$	2.49		109,095		7.73	$	3.48
			1,320,267						842,871

The following table presents details of the assumptions used to calculate the weighted-average grant date fair value of common stock options granted by the Company:

	For the Year Ended December 31,
	2020			2019
Expected term (in years)	5.04			4.6 - 5.9
Expected volatility	43.5 - 47.8%			43.7 - 44.4 %
Risk-free interest rate		0.33	%	2.30 - 2.49%
Weighted average grant date fair value per share	$	0.83		$	1.09
Grant date fair value of options vested	$	554,575		$	706,417
Intrinsic value of options exercised	$	2,370,491		$	559,237

As of December 31, 2020, the amount of unearned stock-based compensation estimated to be expensed from 2020 through 2029 related to unvested common stock options is $325,414, net of estimated forfeitures. The weighted-average period over which the unearned stock-based compensation is expected to be recognized is 2.18 years.

If there are any modifications or cancellations of the underlying unvested awards, the Company may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense or calculate and record additional expense. Future stock-based compensation expense and unearned stock-based compensation will increase to the extent that the Company grants additional common stock options or other stock-based awards.

During the year ended December 31, 2020, the Company issued 314,236 shares of common stock for proceeds of $86,892 in cash related to the exercise of stock options. Of the total shares issued, 240,381 shares of common stock were issued as a cashless exercise of stock options.

During the year ended December 31, 2019, the Company issued 350,587 shares of common stock for proceeds of $47,334, in cash related to the exercise of stock options. Of the total shares issued, 273,600 shares of common stock were issued as a cashless exercise of stock options.

Restricted stock units may be granted at the discretion of the compensation committee of the Board of Directors under the 2017 Plan in connection with the hiring and retention of personnel and are subject to certain conditions. Restricted stock units generally vest quarterly over a period of three years and are typically forfeited if employment is terminated before the restricted stock unit vest. The compensation expense related to the restricted stock units is calculated as the fair value of the common stock on the grant date and is amortized to expense over the vesting period and is adjusted for estimated forfeitures.

The Company’s restricted stock unit activity for the years ended December 31, 2020 and 2019 is as follows:

	Restricted Stock Units
	Number of Shares			Weighted Average Grant Date Fair Value
Unvested at January 1, 2019		173,335		$	4.13
Granted		167,500		$	2.43
Vested		(116,665	)	$	(3.86	)
Canceled		(7,500	)	$	(2.34	)
Unvested at December 31, 2019		216,670		$	3.02
Granted		554,251		$	2.63
Vested		(151,251	)	$	3.16
Canceled		(43,748	)	$	2.43
Unvested at December 31, 2020		575,922		$	2.65

During the year ended December 31, 2020, the Company issued 123,440 restricted stocks units, net of 27,811 units retained for income tax purposes. As of December 31, 2020, there was $918,475 of unrecognized compensation cost related to unvested restricted stock units which is expected to be recognized over a weighted average period of 2.22 years.

Stock-based compensation expense for the years ended December 31, 2020 and 2019 was comprised of the following:

	For the Year Ended December 31,
Stock-based compensation classified as:	2020		2019
General and administrative	$	556,935	$	469,714
Production		65,631		70,243
Marketing and selling		65,580		59,486
Research and development		36,232		50,026
	$	724,378	$	649,469

In connection with the issuance of notes payable and related notes payable in April 2019, the Company issued warrants to debt holders’ share of common stock at an exercise price of $2.15 per share. See Note 8.

The following table summarizes the Company’s warrant activity during the years ended December 31, 2020 and 2019:

	Number of Warrants			Weighted Average Exercise Price
Warrants outstanding – January 1, 2019		578,996		$	4.32
Warrants granted		69,766		$	2.15
Warrants exercised		(17,815	)	$	1.40
Warrants outstanding – December 31, 2019		630,947		$	4.16
Warrants granted		-		$	-
Warrants exercised		(125,001	)	$	0.76
Warrants outstanding – December 31, 2020		505,946		$	5.00