Stockholder's Equity

6 Months Ended

Jun. 30, 2020

Equity [Abstract]

Stockholder's Equity

14. Stockholder’s Equity

	Common Stock				Paid-in		Accumulated			Total Stockholders’
	Shares		Amount		Capital		Deficit			Equity
Balance, December 31, 2019		9,675,028	$	967	$	51,566,438	$	(44,234,087	)	$	7,333,318
Issuance of common stock for services by third parties		129,740		13		182,043		-			182,056
Issuance of common stock for services by employees		212,270		21		363,360		-			363,381
Amortization of non-deal warrant grants		-		-		13,383		-			13,383
Issuance of warrants for secured credit facility		-		-		97,800		-			97,800
Stock-based compensation		-		-		149,074		-			149,074
Net loss attributable to common shareholders		-		-		-		(5,694,964	)		(5,694,964	)
Balance, June 30, 2020		10,017,038	$	1,001	$	52,372,098	$	(49,929,051	)	$	2,444,048

Issuance of Common Stock

In January 2020, the Company issued 90,798 shares of common stock to directors, employees and consultants for stock-based compensation of $290,547. The shares were valued using the closing share price of our common stock on the date of grant of $3.20 per share.

On April 6, 2020, the Company issued 216,363 shares of common stock under the 2016 Equity Incentive Plan to directors, employees and consultants for stock-based compensation of $238,800. The shares were valued using the closing share price of the Company’s common stock on the date of the grant, $1.10 per share.

On May 22, 2020, the Company issued 45,553 shares of common stock to consultants for stock-based compensation of $72,885. The shares were valued using the closing share price of our common stock on the date of grant of $1.60 per share.

On May 28, 2020, 10,704 shares of common stock were retired that had previously been issued to an employee. The shares were valued at the cost at the time of issuance, ranging from $3.20 to $7.94.

Stock-Based Compensation

On September 8, 2016, the Company adopted the 2016 Equity Incentive Plan (the “2016 Plan”). Pursuant to the terms of the plan, on January 1, 2020, the number of shares available for grant under the 2016 Plan reset to 2,887,005 shares, equal to 8% of the number of outstanding shares of the Company’s capital stock, calculated on an as-converted basis, on December 31 of the preceding calendar year, and then added to the prior year plan amount. As of June 30, 2020, there have been 640,825 options and 886,869 restricted stock units (“RSUs”) issued under the 2016 Plan, with vesting schedules varying between immediate and five (5) years from the grant date.

On January 29, 2015, the Company adopted the 2015 Stock Incentive Plan (the 2015 Plan). The total number of shares available for the grant of either stock options or compensation stock under the 2015 Plan is 50,000 shares, subject to adjustment. The exercise price per share of each stock option will not be less than 20 percent of the fair market value of the Company’s common stock on the date of grant. At June 30, 2020, there were 5,417 options issued under the Plan outstanding, which options vest at the rate of at least 25 percent in the first year, starting 6-months after the grant date, and 75% in year two.

The Company also issues, from time to time, options that are not registered under a formal option plan. At June 30, 2020, there were no options outstanding that were not issued under the Plans.

A summary of all stock option activity at and for the six months ended June 30, 2020 is presented below:

	# of Options			Weighted- Average Exercise Price
Outstanding at December 31, 2019		784,101		$	5.65
Options granted		-		$	-
Options exercised		-		$	-
Options canceled		(218,001	)	$	6.76
Outstanding at June 30, 2020		568,600		$	5.22
Exercisable at June 30, 2020		420,225		$	5.03

The aggregate intrinsic value of options outstanding at June 30, 2020 was $0.

At June 30, 2020, there were 148,375 unvested options with an aggregate grant date fair value of $367,362. The unvested options will vest in accordance with the vesting schedule in each respective option agreement, which varies between immediate and five (5) years from the grant date. The aggregate intrinsic value of unvested options at June 30, 2020 was $0. During the six months ended June 30, 2020, 34,889 options became vested.

The Company uses the Black-Scholes valuation model to measure the grant-date fair value of stock options. The grant-date fair value of stock options issued to employees is recognized on a straight-line basis over the requisite service period. Stock-based awards issued to nonemployees are recorded at fair value on the measurement date and are subject to periodic market adjustments as the underlying stock-based awards vest.

To determine the fair value of stock options using the Black-Scholes valuation model, the calculation takes into consideration the effect of the following:

● Exercise price of the option

● Fair value of the Company’s common stock on the date of grant

● Expected term of the option

● Expected volatility over the expected term of the option

● Risk-free interest rate for the expected term of the option

The calculation includes several assumptions that require management’s judgment. The expected term of the options is calculated using the simplified method described in GAAP. The simplified method defines the expected term as the average of the contractual term and the vesting period. Estimated volatility is derived from volatility calculated using historical closing prices of common shares of similar entities whose share prices are publicly available for the expected term of the options. The risk-free interest rate is based on the U.S. Treasury constant maturities in effect at the time of grant for the expected term of the options.

The Company did not issue any additional options during the six months ended June 30, 2020.

For the six months ended June 30, 2020 and 2019, total stock compensation expense related to stock options was $149,074 and $596,852, respectively. At June 30, 2020, the total compensation cost related to stock options not yet recognized is approximately $367,362, which is expected to be recognized over a weighted-average period of approximately 1.62 years.

Warrants

During the six months ended June 30, 2020, the Company issued an aggregate of 100,000 common stock warrants in connection with the Secured Credit Facility from Live Oak Bank. The estimated fair value of the warrants of $97,800 was recorded as debt issuance cost and will be amortized to interest expense over the maturity period of the secured credit facility, with $48,900 recorded in the six months ended June 30, 2020. Warrants issued to three shareholders during 2017 and 2018 vest quarterly for 3 years and resulted in $13,383 worth of amortization expense for the six months ending June 30, 2020.

The estimated fair value of the warrants at issuance was based on a combination of closing market trading price on the date of issuance for the warrants, and the Black-Scholes option-pricing model using the weighted-average assumptions below:

Volatility		40	%
Risk-free interest rate		1.54	%
Expected term (in years)		5.0
Expected dividend yield		-
Fair value of common stock	$	3.20

No warrants were exercised during the six months ended June 30, 2020.

A summary of activity in warrants is as follows:

	Warrants			Weighted Average Remaining Life		Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding at December 31, 2019		736,559			1.18 years	$	6.95	$	-
Six months ended June 30, 2020:
Granted		100,000			4.79 years	$	3.94	$	-
Exercised		-			-	$	-		-
Forfeited and cancelled		(556,281	)		0.53 years	$	7.51		-
Outstanding at June 30, 2020		280,278			2.84 years	$	4.76	$	-