Stockholders' Equity

9 Months Ended

Sep. 30, 2020

Equity [Abstract]

Stockholders' Equity

NOTE 9 – STOCKHOLDERS’ EQUITY

PREFERRED STOCK

Series A

As of September 30, 2020, there were 1,000,000 Series A preferred shares designated and no Series A preferred shares outstanding. The board of directors of the Company (the “Board”) had previously set the voting rights for the Series A preferred stock at 1 share of preferred to 250 common shares.

Series B

As of September 30, 2020, there was 1 preferred share designated and no preferred shares outstanding.

Series C

As of September 30, 2020, there were 5,000,000 Series C preferred shares authorized and 2,145,030 Series C preferred shares outstanding. They have preferential rights above common shares and the Series B preferred shares and are entitled to receive a quarterly dividend at a rate of $0.06 per share per annum. As part of a debt settlement agreement effective December 30, 2017, 1,685,000 shares were issued with the quarterly dividend at a rate of $0.06 per share per annum were waived for a period of 24 months, with no dividends being accrued or paid. Series C preferred shares outstanding are convertible into common stock at the rate of 20 preferred shares for one common share.

Effective June 5, 2020, certain holders of an aggregate of 2,683,500 shares of Series C Preferred Stock individually converted their shares of Series C Preferred Stock into an aggregate of 134,175 shares of common stock at a ratio of 20 shares of Preferred Stock for each share of Common Stock. In addition, the holders of such shares converted all accrued but unpaid dividends, penalties, and interest in the aggregate amount of $393,331 into an aggregate of 56,190 shares of Common Stock at a conversion price of $7.00 per share which was based on the closing price on June 3, 2020. The shares of Common Stock pertaining to these transactions were issued in July, 2020.

COMMON STOCK

During the first nine months of 2020, the Company issued an aggregate of 203 shares of common stock to certain individuals as part of the Company’s Employee Stock Purchase Program valued at approximately $1 thousand.

On July 17, 2020, the Company issued 70,000 shares to IRTH Communications, LLC as part of a consulting agreement. The shares were valued at $392 thousand.

On July 17, 2020, the Company issued 50,000 shares to Stock Loan Solutions LLC as part of a consulting agreement. The shares were valued at $280 thousand.

On July 28, 2020, the Company issued 251,635 shares as part of a series of conversion agreements with former noteholders and preferred shareholders. The shares were valued at $3.5 million including conversion penalties.

During July 2020, various holders exercised in cashless transactions options and warrants resulting in the issuance of 56,248 shares valued at $339 thousand.

As of September 30, 2020, the Company had 4,634,637 common shares outstanding.

Warrants

The following table summarizes information about warrants granted during the nine-month periods ended September 30, 2020 and 2019:

	September 30, 2020					September 30, 2019
	Number of warrants			Weighted Average Exercise Price		Number of warrants		Weighted Average Exercise Price
Balance, beginning of period		1,166,667		$	6.42		275,000	$	4.60
Warrants granted		325,000			8.20		891,667		7.00
Warrants expired		(10,000	)		5.60		-		-
Warrants cancelled, forfeited		-			-		-		-
Warrants exercised		(150,000	)		4.00		-		-
Balance, end of period		1,331,667		$	7.14		1,166,667	$	6.42
Exercisable warrants		1,165,001		$	7.08		1,166,667	$	6.42

For the nine months ended September 30, 2020, the Company granted 325,000 warrants in connection with various consulting agreement.

Outstanding warrants as of September 30, 2020 are as follows:

Range of Exercise Prices		Weighted Average residual life span (in years)		Outstanding Warrants		Weighted Average Exercise Price		Exercisable Warrants		Weighted Average Exercise Price
$	2.20		.84		75,000	$	2.20		75,000	$	2.20
$	7.00		4.02		891,667	$	7.00		891,667	$	7.00
$	7.50		5.93		250,000	$	7.50		83,334	$	7.50
$	8.00		1.41		10,000	$	8.00		10,000	$	8.00
$	10.00		3.66		75,000	$	10.00		75,000	$	10.00
$	12.00		0.03		15,000	$	12.00		15,000	$	12.00
$	14.00		0.41		15,000	$	14.00		15,000	$	14.00
$	2.20 to 14.00		3.99		1,331,667	$	7.14		1,165,001	$	7.08

Warrants outstanding at September 30, 2020 and 2019 have the following expiry date and exercise prices:

Expiry Date	Exercise Prices		September 30, 2020		September 30, 2019
June 26, 2020	$	5.60		-		10,000
October 10, 2020	$	12.00		15,000		15,000
December 30, 2020	$	4.00				150,000
February 27, 2021	$	14.00		15,000		-
August 2, 2021	$	2.20		75,000		75,000
October 10, 2021	$	10.00		25,000		25,000
February 27, 2022	$	8.00		10,000		-
May 18, 2023	$	10.00		50,000		-
October 6, 2024	$	7.00		891,667		891,667
September 1, 2025	$	7.50		83,334		-
June 4, 2026	$	7.50		83,333		-
December 4, 2027	$	7.50		83,333		-
				1,331,667		1,166,667

2014 Stock Option Plan

On November 17, 2014, the Board adopted a stock option plan (the “2014 Plan”) whereby the Board may grant to directors, officers, employees, or consultants of the Company options to acquire common shares. The Board has the authority to determine the terms, limits, restrictions and conditions of the grant of options, to interpret the plan and make all decisions relating thereto. The 2014 Plan was adopted in order to provide an inducement and serve as a long term incentive program. The maximum number of common shares that may be reserved for issuance was set at 500,000.

The option exercise price is established by the Board and may not be lower than the market price of the common shares at the time of grant. The options may be exercised during the option period determined by the Board, which may vary, but will not exceed ten years from the date of the grant.

2018 Stock Option Plan

On March 8, 2018, the Company adopted a stock option plan (the “2018 Plan”) as an incentive, to retain in the employ of and as directors, officers, consultants, advisors and employees to the Company. On October 31, 2018, the Board amended the Plan to increase the amount of shares authorized for issuance thereunder from 500,000 to 800,000 shares of the Corporation’s common stock, par value $0.001 (the “Shares”). On January 23, 2019, the Company’s shareholders adopted and ratified the Plan.

As at September 30, 2020, the Company had issued options under the 2018 Plan allowing for the subscription of 740,500 shares of its common stock, with 59,500 shares remaining for issuance.

2020 Stock Option Plan

On September 30, 2020, the Company adopted a stock option plan (the “2020 Plan”). The purpose of the 2020 Plan is to provide long-term incentives and rewards to directors, officers, consultants, advisors and employees of the Company and its subsidiaries in order to assist the Company to attract and retain individuals with experience and/or ability on a basis competitive with industry practices and to associate the interest of these individuals with those of the Company’s shareholders by providing for the issuance of stock-based awards. The total number of shares of Common Stock authorized for issuance under the 2020 Plan is 1,000,000 shares.

Stock Options

The following table summarizes information about stock options granted during the nine months ended September 30, 2020 and 2019:

	September 30, 2020					September 30, 2019
	Number of stock options			Weighted Average Exercise Price		Number of stock options		Weighted Average Exercise Price
Balance, beginning of period		1,133,550		$	4.00		1,006,050	$	3.80
Stock options granted		775,000			4.63		127,500		5.00
Stock options expired		(30,250	)		3.98		-		-
Stock options cancelled, forfeited		-			-		-		-
Stock options exercised		(66,750	)		2.51		-		-
Balance, end of period		1,811,550		$	4.32		1,133,550	$	4.00
Exercisable stock options		959,550		$	4.02		893,488	$	3.80

For the nine months ended September 30, 2020, the Company granted 775,000 stock options. These options were granted as part of the asset acquisition described in Note 4, and to a member of the board of advisors, and to certain employees as part of the Company’s Equity Incentive Plan.

Outstanding stock options as of September 30, 2020 are as follows:

Range of Exercise Prices		Weighted Average residual life span (in years)		Outstanding Stock Options		Weighted Average Exercise Price		Exercisable Stock Options		Weighted Average Exercise Price
$	1.50 to 1.80		1.38		114,050	$	1.70		114,050	$	1.70
$	2.20		0.84		175,000	$	2.20		175,000	$	2.20
$	10.00		4.14		125,000	$	10.00		125,000	$	10.00
$	2.40		2.43		272,000	$	2.40		272,000	$	2.40
$	4.20		4.56		10,000	$	4.20		2,500	$	4.20
$	4.40		8.65		454,250	$	4.40		66,000	$	4.40
$	4.84		10.01		380,000	$	4.84		-	$	4.84
$	5.00		2.78		147,500	$	5.00		87,188	$	5.00
$	5.40		3.17		133,750	$	5.40		117,812	$	5.40
$	1.50 to 10.00		5.57		1,811,550	$	4.32		959,550	$	4.02

Stock options outstanding at September 30, 2020, and 2019 have the following expiration date and exercise prices:

Expiration Date	Exercise Prices		September 30, 2020		September 30, 2019
August 2, 2021	$	2.20		175,000		175,000
February 17, 2022	$	1.50		38,017		38,017
February 17, 2022	$	1.80		76,033		76,033
February 28, 2023	$	5.00		20,000		-
March 5, 2023	$	2.40		272,000		340,000
July 31, 2023	$	5.00		127,500		127,500
October 31, 2023	$	4.40		89,250		108,250
November 30, 2023	$	5.40		133,750		143,750
November 20, 2024	$	10.00		125,000		125,000
April 20, 2025	$	4.20		10,000		-
September 30, 2030	$	4.40		365,000		-
September 30, 2030	$	4.84		380,000		-
				1,811,550		1,133,550

These options and warrants were valued at the grant date using the Black-Scholes valuation methodology. The Company determines the assumptions used in the valuation of warrants and option awards as of the date of grant. Differences in the expected stock price volatility, expected term or risk-free interest rate may necessitate distinct valuation assumptions at those grant dates. As such, the Company may use different assumptions for options and warrants granted throughout the year. The valuation assumptions used to determine the fair value of each option/warrant award on the date of grant were: expected stock price volatility 152.5% - 155.6%; expected term in years 1.0-10.0; and risk-free interest rate 0.22%-1.16%. The assumptions used in the Black-Scholes-Merton Option Pricing model could materially affect compensation expense recorded in future periods.

Employee and nonemployee stock compensation expense is $2.3 million for the nine months ended September 30, 2020 and $1.1 million for the nine months ended September 30, 2019.