STOCKHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2020

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

NOTE 9.   STOCKHOLDERS’ EQUITY

2019 Capital Raise

On May 31, 2019 we received gross proceeds of $3 million by issuing three million shares of our common stock and three million warrants to purchase shares of our common stock in a registered direct offering for $1.00 per 2019 Unit. The 2019 Warrants had an exercise price of $1.30 per share at issuance and are exercisable for five years from the date of issuance. The number of shares issuable pursuant to the warrants granted under the 2019 Warrants, as well as the exercise price of those warrants, is subject to adjustment as a result of certain future equity issuances of securities by the Company at a price below the then-effective exercise price of the 2019 Warrants. As a result of such subsequent issuances of securities by the Company during the fourth quarter of 2019, the exercise price of the 2019 Warrants had decreased to $0.45 per share and the number of shares subject to the 2019 Warrants had increased to 8,666,666 shares of common stock as of December 31, 2019. As of March 31, 2020, there were 8,466,666 of these warrants outstanding.

We received cash of $2,604,355 which is net of $395,645 of issuance costs. Of the gross proceeds, we recorded $2,416,422 as a warrant derivative liability, as discussed in Note 7.

Share-based compensation

We use the fair value method to account for stock-based compensation.  We recorded $572,574 and $1,492,496 in compensation expense, for the three months ended March 31, 2020 and 2019, respectively.  This includes expense related to options issued in prior years for which the requisite service period for those options includes the current period as well as options issued in the current period.  The fair value of these instruments was calculated using the Black-Scholes option pricing method.  

As of March 31, 2020, there was approximately $605,729 of total unrecognized compensation expense related to unvested Employee Awards, which is expected to be recognized over a weighted-average period of eleven months.

Feinsod Employment Agreement

On August 6, 2019, we entered into an agreement (the “Feinsod Agreement”) with Michael Feinsod for his service as Chief Executive Officer.  Pursuant to the agreement, Mr. Feinsod received 1,000,000 stock options that vest when our stock price has a trading price of equal to or above $4.51 per share for five consecutive days.  The options have an exercise price of $0.83 per share and a ten-year life.  These options were issued under the Incentive Plan.  The options were valued using the Monte Carlo method. For the three months ended March 31, 2020, we recognized approximately $57,000 of share-based compensation expense related to these options.   

The underlying assumptions used in the Monte Carlo simulations to determine the fair value of options were:

	August 6, 2019
Current stock price	$  0.83
Exercise price	$  0.83
Vesting goal	$  4.51
Risk-free interest rate	1.73%
Expected term (in years)	10
Expected volatility	123%