Stockholder's Equity

9 Months Ended

Sep. 30, 2021

Equity [Abstract]

STOCKHOLDER'S EQUITY

NOTE 10 – STOCKHOLDER’S EQUITY

Common Stock

On August 26, 2021, the Company completed the Offering of 1,642,856 shares of its common stock at a public offering price of $7.00 per share, including 214,285 shares sold upon full exercise of the underwriter’s option to purchase additional shares, for gross proceeds of approximately $11.5 million, before deducting underwriting discounts and offering expenses.

During the nine months ended September 30, 2021, shares of common stock were issued as a result of the following non-cash transactions:

● In the first quarter of 2021, convertible notes totaling $120,000 and a portion of their accrued interest at the option of the noteholders were converted into approximately 33,000 shares of common stock of the Company

● Additionally, during the three and nine months ended September 30, 2021, the Company received conversion notices from (i) the Stern Trust converting the principal amount, repayment premium and interest in the amount of approximately $3.5 million payable under the Restated Stern Note into approximately 561,000 shares of common stock, (ii) the 8% Note Investors converting principal and interest in the amount of approximately $0.4 million into approximately 180,000 shares of common stock and (iii) the 2020 Note Investors converting principal, repayment premium and interest in the amount of approximately $2.5 million into approximately 398,000 shares of common stock. The Stern Trust is owed approximately $0.7 million in interest under the Restated Stern Note, which has not been converted and remains outstanding. As a result, a total of approximately $6.1 million of Company indebtedness was converted and the Company issued approximately 1,138,000 shares of common stock in the aggregate.

● Certain warrant and stock option holders exercised their respective warrants and stock options by means of the cashless exercise feature and were issued approximately 549,000 common shares of the Company.

Warrants

The following is a summary of the Company’s warrant activity for the nine months ended September 30, 2021:

				Weighted Average		Weighted Average
	Number of			Exercise		Remaining
	Shares			Price		Life
Outstanding at December 31, 2020		1,823,267		$	4.20	3.4 Years
Granted		64,286		$	8.75	4.3 Years
Exercised/cancelled		(473,942	)	$	3.20	4.2 years
Outstanding at September 30, 2021		1,413,611		$	4.61	3.2 Years

Under the terms of the Underwriting Agreement in connection with the Offering, the Company issued underwriters warrants (the “Representative’s Warrants”) to purchase an aggregate of 64,286 shares of common stock (4.5% of the total shares issued in the Offering). The Representative’s Warrants are exercisable at a per share price of $8.75 (equal to 125% of the Offering price of the Company’s common stock). The Representative’s Warrants are exercisable for a term of four and one half years beginning on February 23, 2022.

Stock Options

During the nine months ended September 30, 2021, the Company determined the grant date fair value of the options granted using the Black Scholes Method and use the following assumptions:

Expected Volatility – 68-75%

Expected Term – 5.0 Years

Risk Free Rate – 0.70- 0.78%

Dividend Rate – 0.00%

Activity related to stock options for the nine months ended September 30, 2021 is summarized as follows:

● The Company granted Mr. Thimot and Mr. Smith stock options to acquire 1,200,000 and 600,000 shares of common stock respectively upon their employment of which half of the options vest monthly over four years and the balance vest upon the achievement of certain market capitalization thresholds or performance conditions.

● The Company granted each of Mr. Kumnick and Mr. Broenniman stock options to acquire 583,333 shares of common stock that vest upon the achievement of certain market capitalization thresholds or performance conditions. In November 2021 Mr. Kumnick and Mr. Broenniman agreed to cancel 300,000 and 200,000, respectively, of these stock options in consideration of removing certain service conditions.

● The Company granted each of the four new Board of Directors as of June 2021 stock options to acquire 62,500 shares of common stock or a total of 250,000 that vest one third a year after each Annual Meeting.

● The Company granted the previously serving Board of Directors stock options to acquire 93,470 common shares that are vested as the services were rendered. The stock options were granted in lieu of other forms of Board of Director Compensation and was used to eliminate previously accrued Board of Director compensation. The Company also granted to each of Mr. Selzer and Mr. Stern 22,388 stock options to acquire common shares for service in 2021 prior to their resignation as Board Members. Upon their resignation as directors in June 2021, 6,997 stock options to each of them were vested and the balance was cancelled.

● The Company granted options to acquire 1,003,334 shares of common stock to employees. The options for 803,334 vest annually over a three-year period, 100,000 vest equally over a four-year period, and the balance of 100,000 vest upon the achievement of certain market capitalization thresholds or performance conditions.

The options have a term of ten years and all options were granted at market value.

Activity related to stock options for the nine months ended September 30, 2021, is summarized as follows:

				Weighted		Weighted
				Average		Average		Aggregate
	Number of			Exercise		Contractual		Intrinsic
	Shares			Price		Term (Yrs.)		Value
Outstanding as of December 31, 2020		5,645,802		$	4.50		7.5	$	8,823,639
Granted		4,358,246		$	7.95		10.0		-
Exercised		(504,804	)	$	1.54		5.0	$	3,485,482
Forfeited/cancelled		(177,091	)	$	4.30		8.8		-
Outstanding as of September 30, 2021		9,322,153		$	6.28		7.1	$	48,380,894
Exercisable as of September 30, 2021		4,708,113		$	5.15		4.5	$	30,866,033

The following table summarizes stock option information as of September 30, 2021:

Exercise Price	Outstanding		Weighted Average Contractual Life (Yrs.)		Exercisable
$.03 - $4.00		3,664,901		4.9		3,208,347
$4.01 - $7.00		162,784		4.7		162,784
$7.01 - $10.00		4,007,801		9.6		270,315
$10.01 - $13.50		1,486,667		4.3		1,066,667
		9,322,153		7.1		4,708,113

During the nine months ended September 30, 2021, the Company recognized approximately $3,567,000 of stock option compensation expense of which approximately $2,388,000 relates to performance-based awards of directors and officers. As of September 30, 2021, there was approximately $15,443,000 of unrecognized compensation costs related to stock options outstanding that are expected to be expensed through 2025.

Additionally, the Company recorded approximately $1,228,000 for restricted stock expense as the Company met certain performance thresholds.

Total stock-based compensation expense consisting of stock options and restricted stock in the nine months ended September 30, 2021 was approximately $4,795,000.

At the Annual Meeting of Stockholders held on March 22, 2021, the stockholders approved and ratified an increase of 2,500,000 shares of common stock allocated to the Company’s 2017 Incentive Stock Plan.

See Note 6 for additional information regarding accrued Directors’ compensation.