Annual report pursuant to Section 13 and 15(d)

Equity Transactions

v3.21.1
Equity Transactions
12 Months Ended
Dec. 31, 2020
Equity [Abstract]  
Equity Transactions

NOTE 10 – EQUITY TRANSACTIONS

 

Common Stock:

 

Year Ended December 31, 2019

 

During the year ended December 31, 2019, the Company issued an aggregate of 1,550,000 shares of restricted common stock to employees with a total fair value of $143,000 for services rendered. The shares issued are non-refundable and deemed earned upon issuance. As a result, the Company expensed the entire $143,000 upon issuance. The shares issued were valued at the date earned under the respective agreement based upon closing market price of the Company’s common stock.

 

During the year ended December 31, 2019, the Company issued an aggregate of 25,000 shares of restricted common stock to consultants with a total fair value of $2,000. The shares issued are non-refundable and deemed earned upon issuance. As a result, the Company expensed the entire $2,000 upon issuance. The shares issued were valued at the date earned under the respective agreements based upon closing market price of the Company’s common stock.

 

During the year ended December 31, 2019, the Company issued an aggregate of 1,000,000 shares of common stock in conversion of notes payable with a total fair value of $100,000. As a result, the Company reduced the balance due on the notes by $100,000 upon issuance.

 

Year Ended December 31, 2020

 

During the year ended December 31, 2020, the Company issued an aggregate of 5,850,000 shares of restricted common stock to employees and directors with a total fair value of $1,335,000 for services rendered. The shares issued are non-refundable and deemed earned upon issuance. As a result, the Company expensed the entire $1,335,000 upon issuance. The shares issued were valued at the date earned under the respective agreement based upon closing market price of the Company’s common stock.

 

During the year ended December 31, 2020, the Company issued an aggregate of 3,407,500 shares of common stock in conversion of notes payable with a total fair value of $548,000. As a result, the Company reduced the balance due on the notes by $548,000 upon issuance.

 

Options:

 

The following table summarizes common stock options activity:

        Weighted
        Average
        Exercise
    Options   Price
  Outstanding, January 1, 2019       12,449,900     $ 1.64  
  Granted       —         —    
  Exercised       —         —    
  Expired       (3,150,000 )     4.81  
  Outstanding, December 31, 2019       9,299,900     $ 0.57  
                     
  Granted       5,000,000       0.99  
  Exercised       —         —    
  Expired       (8,500,000 )     4.76  
  Outstanding, December 31, 2020       5,799,900     $ 0.88  
                     
  Exercisable, December 31, 2019       9,299,900     $ 0.57  
  Exercisable, December 31, 2020       5,799,900     $ 0.88  

 

The weighted average grant date fair value of options granted during the years ended December 31, 2020 and 2019, was $0.99 and $0.00 respectively.

 

During the year ended December 31, 2020, the Company granted stock options to employees to purchase a total of 5.000,000 shares of the Company’s restricted common stock. The options are fully vested, exercisable at prices ranging from $0.25 to $1.50 per share and will expire over 2.5 years. The fair values of the options are recorded at their grant dates computed using the Black-Scholes Option Pricing Model. During the year ended December 31, 2020, the Company recognized $561,000 in compensation expense on the issuance of these options. As of December 31, 2020, there was no additional unearned compensation costs to be recorded.

 

The weighted average exercise prices, remaining lives for options granted, and exercisable as of December 31, 2020 were as follows:

                     
    Outstanding Options       Exercisable Options
Options           Weighted       Weighted
Exercise Price       Life   Average Exercise       Average Exercise
Per Share   Shares   (Years)   Price   Shares   Price
$0.25   1,000,000   0.80   $0.25   1,000,000   $0.25
$0.50   1,300,000   1.30   $0.50   1,300,000   $0.50
$1.00   2,099,900   0.10 – 1.80   $1.00   2,099,900   $1.00
$1.50   1,400,000   2.30   $1.50   1,400,000   $1.50
    5,799,900       $0.88   5,799,900   $0.88

 

On December 31, 2020, the Company’s closing stock price was $0.08 per share. As all outstanding options had an exercise price greater than $0.08 per share, there was no intrinsic value of the options outstanding as of December 31, 2020.

 

Warrants:

 

The following table summarizes common stock warrants activity:

        Weighted
        Average
        Exercise
    Warrants   Price
  Outstanding, January 1, 2019       9,000,000     $ 0.46  
  Granted       100,000       0.50  
  Exercised       —         —    
  Expired       (100,000 )     0.50  
  Outstanding, December 31, 2019       9,000,000     $ 0.46  
                     
  Granted       2,800,000       0.25  
  Exercised       0       —    
  Expired       (700,000 )     0.08  
  Outstanding, December 31, 2020       11,100,000     $ 0.39  
                     
  Exercisable, December 31, 2019       9,000,000     $ 0.46  
  Exercisable, December 31, 2020       11,100,000     $ 0.39  

 

In April 2018, in combination with a 12-month convertible promissory note, as amended, the Company granted warrants to purchase a total of 500,000 shares of restricted common stock with an exercise price of $0.25 and will expire April 20, 2021. The warrants are fully vested and exercisable upon grant. The proceeds of the note were allocated between the note and the warrants based on the relative fair values which resulted in proceeds of $61,000 allocated to the warrants and recorded as paid in capital and debt discount. The debt discount was amortized over the life of the note as interest expense. During the year ended December 31, 2020 and 2019, the Company recognized $0 and $18,000, respectively, of debt discount interest. During the year ended December 31, 2020, pursuant to a debt settlement agreement, the Company amended the exercise price of the warrants and recorded $9,000 in debt settlement costs, recognized as interest expense.

 

In May 2018, in combination with an 8-month convertible promissory note, as amended, the Company granted warrants to purchase a total of 1,200,000 shares of restricted common stock with an exercise prices of $0.25 and will expire May 22, 2023. The warrants are fully vested and exercisable upon grant. The proceeds of the note were allocated between the note and the warrants based on the relative fair values which resulted in proceeds of $32,000 allocated to the warrants and recorded as paid in capital and debt discount. The debt discount will be amortized over the life of the note as interest expense. During the year ended December 31, 2020 and 2019, the Company recognized $0 and $3,000, respectively, of debt discount interest. During the year ended December 31, 2020, pursuant to a debt settlement agreement, the Company increased the number of warrants amended the exercise price of the warrants and recorded $87,000 in debt settlement costs, recognized as interest expense.

 

In October 2019, pursuant to advisory services agreement, the Company granted warrants to purchase a total of 100,000 shares of restricted common stock with an exercise price of $0.50 and expiration date of October 30, 2020. The warrants are fully vested and exercisable upon grant. Total fair value of the options at grant date amounted to $1,000 computed using the Black-Scholes Option Pricing Model and was fully recognized on the date of grant.

 

In October and November 2020, in combination with a 5-year convertible promissory note, the Company granted warrants to purchase a total of 2,000,000 shares of restricted common stock with an exercise prices of $0.25 and will expire on various dates between October 5, 2025 and November 24, 2025. The warrants are fully vested and exercisable upon grant. The proceeds of the note were allocated between the note, the warrants, and the derivative liability which resulted in proceeds of $0 allocated to the warrants.

 

The weighted average exercise prices, remaining lives for warrants granted, and exercisable as of December 31, 2020, were as follows:

 

    Outstanding and Exercisable Warrants  
Warrants          
Exercise Price       Life  
Per Share   Shares   (Years)  
$0.15   1,200,000   0.03  
$0.25   4,500,000   0.30 – 4.90  
$0.40   1,200,000   0.03  
$0.50   2,700,000   0.41 – 2.53  
$0.75   1,250,000   0.41 – 2.53  
$1.00   1,250,000   0.41  
    11,100,000      

 

At December 31, 2020, the Company’s closing stock price was $0.08 per share. As all outstanding warrants had an exercise price greater than $0.08 per share, there was no intrinsic value of the options outstanding at December 31, 2020.

 

The table below represents the average assumptions used in valuing the stock options and warrants granted in fiscal 2019:

 

    Year Ended
December 31,
    2019
Expected life in years     1.00  
Stock price volatility     215 %
Risk free interest rate     1.53 %
Expected dividends     —    
Forfeiture rate     —    

 

The table below represents the average assumptions used in valuing the stock options and warrants granted in fiscal 2020:

 

     

Year Ended

December 31,

 
      2020  
Expected life in years     1.00 – 5.00  
Stock price volatility     177% - 246%  
Risk free interest rate     0.12 % - 0.22%  
Expected dividends     —    
Forfeiture rate     —    

 

The assumptions used in the Black Scholes models referred to above are based upon the following data: (1) the contractual life of the underlying non-employee options is the expected life. The expected life of the employee option is estimated by considering the contractual term of the option, the vesting period of the option, the employees’ expected exercise behavior and the post-vesting employee turnover rate. (2) The expected stock price volatility was based upon the Company’s historical stock price over the expected term of the option. (3) The risk-free interest rate is based on published U.S. Treasury Department interest rates for the expected terms of the underlying options. (4) The expected dividend yield was based on the fact that the Company has not paid dividends to common shareholders in the past and does not expect to pay dividends to common shareholders in the future. (5) The expected forfeiture rate is based on historical forfeiture activity and assumptions regarding future forfeitures based on the composition of current grantees.

 

Shares Reserved:

 

At December 31, 2020, the Company has reserved 80,000,000 shares of common stock in connection with convertible notes with detachable warrants, 100,000,000 shares of common stock in connection with shares underlying an equity line of credit and 3,500,000 shares of common stock underlying warrants issued in connection with the court approved settlement agreement for a total of 183,500,000 reserved shares of common stock.