STOCKHOLDERS' EQUITY | NOTE 16 STOCKHOLDERS EQUITY Preferred Stock On July 18, 2017, the Board of Directors adopted a resolution creating a series of Preferred Shares, no par value per share, designated as the Series A Preferred Shares. We subsequently issued 2,000 shares of our Series A Preferred Shares for $2,200 to our officers and directors. On March 20, 2019, we issued 2,000 additional shares of our Series A Preferred Shares to two officers and directors. Each preferred share is entitled to 15,000 votes on all matters submitted to the vote of our shareholders, is entitled to an annual dividend of $0.05 per share when, as, and if declared by our directors, and is convertible at any time, at the option of the holder of the preferred shares, into one share of our common stock. The Series A Preferred Shares do not have any intrinsic a value in that they have only have voting rights and not a value on a price per share basis. Mr. Verzura returned his 500 shares of Series A Preferred Shares to the Company upon his resignation as a director and officer of the Company on March 21, 2019. We subsequently cancelled Mr. Verzuras 500 shares of Series A Preferred Shares effective March 21, 2019. Authorized Common Shares At a meeting of the shareholders of the Company on May 15, 2019, the authorized shares of common stock of the Company were increased from 100,000,000 shares to 200,000,000 shares. Equity offerings February 14, 2018, we sold 65,440 shares of our common stock to an accredited investor for $57,083. Such shares were valued at $76,798 based on the previous trading days closing price. The difference between the proceeds received of $57,083 and the value of our common stock of $76,798 was recorded as a loss on the issuance of common stock. August 20, 2018, we sold 27,359 shares of our common stock to an accredited investor for $10,000. Such shares were valued at $13,249 based on the previous trading days closing price. The difference between the proceeds received of $10,000 and the value of our common stock of $13,249 was recorded as a loss on the issuance of common stock. August 31, 2018, we sold 100,000 shares of our common stock to an accredited investor for $51,500. Such shares were valued at $62,750 based on the previous trading days closing price. The difference between the proceeds received of $51,500 and the value of our common stock of $62,750 was recorded as a loss on the issuance of common stock. March 11, 2019, we sold 52,288 shares of our common stock to an accredited investor for $20,000. May 8, 2019, we sold 500,000 shares of our common stock to an accredited investor for $135,000. May 14, 2019, we sold 600,000 shares of our common stock to accredited investors for $162,000. June 11, 2019, we sold 100,000 shares of our common stock to an accredited investor for $27,000. Common Stock Issued for Services On December 31, 2018, we issued 251,497 shares of common stock valued at $75,700, based on the previous trading days closing price, as annual incentive bonuses for certain employees. We recorded the $75,700 value of the common stock as share-based compensation expense and included this in general and administrative expenses in our consolidated statements of operations. At various times throughout the year ended December 31, 2018, we issued 50,000 shares of our common stock valued at $36,156 for marketing services, and we recorded the value of the shares as share-based compensation and recorded this in marketing, advertising and new business development expenses in our consolidated statements of operations. At various times throughout the year ended December 31, 2018, we issued 310,000 shares of our common stock valued at $223,996 for legal services, and we recorded the value of the shares as share-based compensation and in legal, accounting, consulting and public reporting in our consolidated statements of operations. At various times throughout the year ended December 31, 2018, we issued 363,163 shares of our common stock valued at $297,400 as compensation to employees, and we recorded the value of the shares as share-based compensation, which we recorded in general and administrative expenses in our consolidated statements of operations. On December 31, 2018, we issued 147,227 shares of common stock valued at $96,000, based on the applicable previous trading days closing price, as a component of employee compensation. We recorded the $96,000 value of the common stock as share-based compensation expense and included this in general and administrative expenses in our consolidated statements of operations. During the nine months ended September 30, 2019, we issued 75,000 shares of our common stock valued at $52,621 for marketing services, and we recorded the value of the shares as share-based compensation and recorded this in marketing, advertising and new business development expenses in our consolidated statements of operations. During the nine months ended September 30, 2019, we issued 60,000 shares of our common stock valued at $24,339 for research and development consulting services, and we recorded the value of the shares as share-based compensation and recorded this in Research and development expenses in our consolidated statements of operations. During the nine months ended September 30, 2019, we issued 90,000 shares of our common stock valued at $38,430 for legal services, and we recorded the value of the shares as share-based compensation in Legal, accounting, consulting and public reporting in our consolidated statements of operations. Warrants: The following table summarizes our share warrants outstanding as of September 30, 2019 and December 31, 2018: September 30, 2019 December 31, 2018 Number of Shares Weighted Average Exercise Price Number of Shares Weighted Average Exercise Price Warrants outstanding, beginning of period 1,309,033 $ 0.27 $ 1,209,025 $ 0.21 Warrants issued to consultants 75,006 0.43 100,008 0.89 Warrants exercised Expired Warrants outstanding, end of period 1,384,039 0.21 1,309,033 $ 0.27 Warrants exercisable, end of period 1,384,039 $ 0.21 1,309,033 $ 0.27 The weighted-average remaining contractual life for warrants outstanding and exercisable at September 30, 2019 and December 31, 2018, is 2.62 years and 3.0 years, respectively; and the aggregate intrinsic value of warrants outstanding and exercisable at September 30, 2019 and December 31, 2018 is $0. 132,669 warrants issued during the year ended December 31, 2017 were valued utilizing the Black Scholes option pricing model and the following range of assumptions on the date of valuation: Stock price $ 0.16 - $2.18 Exercise price $ 0.18 Risk free interest rate 1.01% - 1.37 % Expected term (years) 5 Expected volatility 322% - 504 % Expected dividends 0 % 100,008 warrants issued during the year ended December 31, 2018 were valued utilizing the Black Scholes option pricing model and the following range of assumptions on the date of valuation: Stock price $ 0.16 - $2.18 Exercise price $ 0.18 Risk free interest rate 1.01% - 1.37 % Expected term (years) 5 Expected volatility 322% - 504 % Expected dividends 0 % 75,006 warrants issued during the nine months ended September 30, 2019 were valued utilizing the Black Scholes option pricing model and the following range of assumptions on the date of valuation: Stock price $ 0.34 - $0.45 Exercise price $ 0.43 Risk free interest rate 1.76% - 2.52 % Expected term (years) 5 Expected volatility 140% - 185 % Expected dividends 0 % 2014 Equity Incentive Plan On November 20, 2014, our board of directors approved our 2014 Stock Incentive Plan (the Plan) and the Plan became effective on November 19, 2015. The Plan provides officers, directors, selected employees and outside consultants an opportunity to acquire or increase a direct ownership interest in our operations and future success. Our board of directors currently administers the Plan and makes all decisions concerning which officers, directors, employees and other persons are granted awards, how many to grant to each recipient, when awards are granted, the terms and conditions applicable to awards, how the Plan should be interpreted, whether to amend or terminate the Plan and whether to delegate administration of the Plan to a committee. A maximum of 4,000,000 common shares are subject to the Plan. The Plan provides for the grant of stock options, stock awards, restricted stock units and stock appreciation rights. Stock options may be non-qualified stock options or incentive stock options except that stock options granted to outside directors, consultants or advisers providing services to us shall in all cases be non-qualified stock options. The Plan will terminate on November 20, 2024, unless the administrator terminates the Plan earlier. As of September 30, 2019, and December 31, 2018, no common shares were available for issue under the Plan. 2017 Equity Incentive Plan On May 31, 2017, our board of directors approved our 2017 Stock Incentive Plan (the Plan) and the Plan became effective on May 31, 2017. The Plan provides officers, directors, selected employees and outside consultants an opportunity to acquire or increase a direct ownership interest in our operations and future success. Our board of directors currently administers the Plan and makes all decisions concerning which officers, directors, employees and other persons are granted awards, how many to grant to each recipient, when awards are granted, the terms and conditions applicable to awards, how the Plan should be interpreted, whether to amend or terminate the Plan and whether to delegate administration of the Plan to a committee. A maximum of 6,000,000 common shares are subject to the Plan. The Plan provides for the grant of stock options, stock awards, restricted stock units and stock appreciation rights. Stock options may be non-qualified stock options or incentive stock options except that stock options granted to outside directors, consultants or advisers providing services to us shall in all cases be non-qualified stock options. The Plan will terminate on May 31, 2027, unless the administrator terminates the Plan earlier. As of September 30, 2019, and December 31, 2018, 900,342 common shares were available for issue under the Plan. 2018 Equity Incentive Plan On January 31, 2018, our board of directors approved our 2018 Stock Incentive Plan (the Plan) and the Plan became effective on January 31, 2018. On June 21, 2018, our board of directors amended the Plan to increase the maximum number of our shares of common shares subject to the plan from 12,500,000 to 25,000,000. The Plan provides officers, directors, selected employees and outside consultants an opportunity to acquire or increase a direct ownership interest in our operations and future success. Our board of directors currently administers the Plan and makes all decisions concerning which officers, directors, employees and other persons are granted awards, how many to grant to each recipient, when awards are granted, the terms and conditions applicable to awards, how the Plan should be interpreted, whether to amend or terminate the Plan and whether to delegate administration of the Plan to a committee. The Plan provides for the grant of stock options, stock awards, restricted stock units and stock appreciation rights. Stock options may be non-qualified stock options or incentive stock options except that stock options granted to outside directors, consultants or advisers providing services to us shall in all cases be non-qualified stock options. The Plan will terminate on January 31, 2028, unless the administrator terminates the Plan earlier. As of September 30, 2019, and December 31, 2018, 81,040,000 common shares were available for issue under the Plan. Stock Options On January 12, 2016, we awarded 1,050,000 stock options to each of Messrs. Blackmon and Verzura and 980,000 stock options to Mr. Ruby under our 2014 Stock Incentive Plan. The options were fully vested at the time of grant and give the option holder the right to purchase shares of our common stock at $0.20 per share during the ten-year term of the option. We calculated the fair value of each option to be approximately $0.20 per option utilizing the Black Scholes option pricing model and the following assumptions on the date of valuation: Stock price $ 0.20 Exercise price $ 0.20 Risk free interest rate 1.98 % Expected term (years) 10.0 Expected volatility 173 % Expected dividends 0 % On February 28, 2018, we awarded 6,000,000 stock options to various employees under our 2017 Stock Incentive Plan. Of these options, 5,125,000 were fully vested at the time of grant with the remaining 875,000 vesting quarterly through December 31, 2019. The awarded options give the option holder the right to purchase shares of our common stock at $1.08 per share during the ten-year term of the option. We calculated the fair value of each option to be approximately $0.91 per option utilizing the Black Scholes option pricing model and the following range of assumptions on the date of valuation: Stock price $ 1.05 Exercise price $ 1.08 Risk free interest rate 2.8 % Expected term (years) 5-10 Expected volatility 197 % Expected dividends 0 % The total grant-date fair value of these options was approximately $6,146,000. Stock-based compensation expense related to these stock options included in operating expenses for the twelve months ended December 31, 2018 was approximately $5,785,348. On June 29, 2018, we awarded 14,195,000 stock options to various employees under our 2018 Stock Incentive Plan. Of these options, 13,250,000 were fully vested at the time of grant with the remaining 945,000 vesting quarterly through July 1, 2022. The awarded options give the option holder the right to purchase shares of our common stock at $0.705 per share during the ten-year term of the option. We calculated the fair value of each option to be approximately $0.59 per option utilizing the Black Scholes option pricing model and the following range of assumptions on the date of valuation: Stock price $ 0.705 Exercise price $ 0.705 Risk free interest rate 2.73% - 2.81 % Expected term (years) 5 Expected volatility 427% - 505 % Expected dividends 0 % The total grant-date fair value of these options was approximately $9,711,400. Stock-based compensation expense related to these stock options included in operating expenses for the twelve months ended December 31, 2018 was approximately $9,104,999. On September 24, 2018, we awarded 3,860,000 stock options to various employees under our 2018 Stock Incentive Plan. Of these options, 3,000,000 were fully vested at the time of grant with the remaining 860,000 vesting on September 24, 2024. The awarded options give the option holder the right to purchase shares of our common stock at $0.43 per share during the ten-year term of the option. We calculated the fair value of each option to be approximately $0.59 per option utilizing the Black Scholes option pricing model and the following range of assumptions on the date of valuation: Stock price $ 0.40 Exercise price $ 0.43 Risk free interest rate 1.52% - 1.58 % Expected term (years) 5-7.5 Expected volatility 137% - 176 % Expected dividends 0 % The total grant-date fair value of these options was approximately $1,367,000. Stock-based compensation expense related to these stock options included in operating expenses for the nine months ended September 30, 2019 was approximately $1,037,000. The following table summarizes our stock options outstanding as of September 30, 2019 and December 31, 2018, respectively: Number of Weighted Weighted Stock options outstanding at December 31, 2017 6,637,500 8.9 $ 0.28 Issued 20,199,800 9.3 $ 0.57 Exercised Expired Stock options outstanding at December 31, 2018 26,837,300 9.2 $ 0.43 Issued 3,860,000 10.0 0.43 Exercised Expired Stock options outstanding at September 30, 2019 30,707,300 8.6 $ 0.42 Stock options exercisable at September 30, 2019 28,828,300 8.7 $ 0.42 The total price to exercise all outstanding stock options is $12,921,439. The weighted-average remaining contractual life for stock options outstanding and exercisable at September 30, 2019, is 8.4 years, and the aggregate intrinsic value of options outstanding and exercisable at September 30, 2019 is $0. On July 25, 2018, we repriced the exercise price per share from $1.08 to $0.58 per share for the stock options to purchase 6,000,000 shares of our common stock that were granted on March 28, 2018 and repriced the exercise price per share from $0.705 to $0.58 per share for the stock options to purchase 14,195,000 of our common stock that were granted on June 29, 2018. No adjustment to shared-based compensation in the consolidated financial statements for the nine months ended September 30, 2019 was necessary as a result of the repricing of the stock options. On August 17, 2018, we repriced the exercise price per share (i) from $0.70 to $0.43 for per share for stock options to purchase 600,000 shares of our common stock that were granted on January 1, 2015 (ii) from $0.56 to $0.43 for per share for stock options to purchase 2,900,000 shares of our common stock that were granted on January 12, 2016 (iii) from $0.92 to $0.43 for 57,500 per share for stock options to purchase 57,500 shares of our common stock that were granted on July 27, 2017 (iv) from $0.875 to $0.43 per share for stock options to purchase 1,000,000 shares of our common stock that were granted on December 8, 2017 (v) from $0.58 to $0.43 per share for stock options to purchase 6,000,000 shares of our common stock that were granted on March 28, 2018 and (vi) from $0.58 to $0.43 per share for stock options to purchase 14,195,000 of our common stock that were granted on June 29, 2018. No adjustment to shared-based compensation in the consolidated financial statements for the nine months ended September 30, 2019 was necessary as a result of the repricing of the stock options. |