Stockholders' Equity

12 Months Ended

Dec. 31, 2022

Equity [Abstract]

Stockholders' Equity

Note 13. Stockholders’ Equity

Stock Issuance

On October 18, 2021, the Company entered into an Underwriting Agreement with Maxim Group LLC on behalf of itself and as representative of the underwriters named therein (the “Underwriting Agreement”), pursuant to which the Company issued and sold, in an underwritten public offering (the “Public Offering”), 6,315,780 units, with each unit consisting of one share of common stock, $0.001 par value per share (“Common Stock”), and one warrant to purchase one share of Common Stock (the “Common Warrants”). The units were sold to the public at the price of $4.75 per unit.

On October 19, 2021, the Public Offering closed, resulting in gross proceeds to the Company of approximately $30,000,000, before deducting the underwriting discounts and commissions and estimated offering expenses. The Company also granted to the underwriter a 45-day option to purchase up to an additional 947,367 shares of Common Stock (“Option Shares”) and/or warrants (“Option Warrants”) to purchase up to 947,367 shares of Common Stock (the “Over-Allotment Option”). The underwriter partially exercised the Over-Allotment Option, and the Company thereby issued and sold the additional 947,367 Option Warrants, in a simultaneous closing with the Public Offering on October 19, 2021. On October 20, 2021, the underwriter exercised the remainder of the Over-Allotment Option, and the Company thereby issued and sold the additional 947,367 Option Shares (the “October 20 Over-Allotment Closing”).

The Common Warrants issued in the offering are immediately exercisable and entitle the holder to purchase one share of Common Stock at an exercise price equal to $5.00 and expire on the fifth anniversary of the issuance date. The Common Warrants may be exercised on a cashless basis if there is no effective registration statement available for the resale of the shares of common stock underlying such warrants.

The Company agreed to an underwriting discount of 8% of the public offering price of the Units sold in this offering. In addition, the Company issued to Maxim Group LLC (or its designee) warrants to purchase to purchase an aggregate of 3% of the number of shares of Common Stock sold in the Public Offering, which warrants entitle the holder to purchase up to an aggregate of 217,894 shares of Common Stock after the October 20 Over-Allotment Closing (the “Representative’s Warrants”). The Representative’s Warrants have an exercise price equal to $5.94, which is 110% of the offering price in the Public Offering. The Representative’s Warrants may be exercised on a cashless basis and became exercisable six months following the closing date until April 16, 2025.

The Company issued 200,000 shares on November 4, 2021 pursuant to an agreement that is for one year with two vendors who provide consulting in the blockchain and crypto currency field. The total fair value of the stock at the time of issuance was approximately $1,318,000 of which we expensed $1,098,331 and $219,667 for the years ended December 31, 2022 and 2021, respectively.

The Company also issued 73,940 shares to management as part of their employment contracts of which $229,500 was expensed. The shares were physically issued in February 2022.

Stock Warrants

The following is a summary of the stock warrant plan activity during the years ended December 31, 2022 and 2021:

	2022		2021
	Number of Warrants	Weighted Average Exercise Price	Number of Warrants	Weighted Average Exercise Price
Warrants Outstanding at Beginning of the year	7,702,441	$5.00	2,718,012	$4.20
Granted	-	-	7,481,041	5.03
Exercised	-	-	2,496,612	4.22
Adjustment	-	-	-	-
Forfeited	25,000	4.50	-	-
Warrants Outstanding and Exercisable at End of Year	7,677,441	$5.00	7,702,441	$5.00

The aggregate intrinsic value of the outstanding common stock warrants as of December 31, 2022 and 2021 was approximately $0 and $177,000, respectively.

On October 31, 2018, the Company issued warrants as part of its secondary offering that allowed for the right to purchase 500,000 shares of common stock at an exercise price of $12.00 per share which were subsequently adjusted due to an issuance of shares in August 2020 to $3.35 per share. These warrants have an average remaining life of .8 years as of December 31, 2022 and expire in the year 2023. During the year ended December 31, 2021 warrants for 299,000 shares were exercised for approximately $1,004,000. No warrants were exercised during the year ended December 31, 2022.

On August 18, 2020, the Company issued warrants as part of its secondary offering that allowed for the right to purchase 2,240,000 shares of common stock at an exercise price of $4.50 per share. These warrants have an average remaining life of 2.63 years as of December 31, 2022 and expire in the year 2025. During the years ended December 31, 2021, warrants for 1,901,700 shares were exercised for $8,539,800. No warrants were exercised during the year ended December 31, 2022.

On April 2, 2018, the Company issued warrants that allowed for the right to purchase 8,000 shares of common stock at an exercise price of $33.03 per share. If at any time these warrants are outstanding, the Company combines its outstanding shares of common stock into a smaller number of shares or enters into a corporate action or transaction to change the number of outstanding shares of common stock, then the exercise price will be adjusted along with the number of shares that can be purchased under this agreement. Due to the subsequent issuance of stock and warrants on October 31, 2018, these warrants represented the right to purchase 155,412 shares of common stock at an exercise price of $1.70 per share. These warrants were exercised under a cashless option for 129,836 common shares during the year ended December 31, 2021.

As part of its underwriting agreement dated, October 31, 2018, the Company issued additional warrants, effective May 1, 2019, to its underwriter as part of its secondary offering that allowed for the right to purchase 25,000 shares of common stock at an exercise price of $13.20 per share on or after May 1, 2019. These warrants expired on May 2, 2022.

During the year ended December 31, 2021, warrants for 140,500 shares related to the 2021 Public Offerings were exercised for approximately $702,000.

Stock Options

The following is a summary of the stock option plan activity during the years ended December 31, 2022 and 2021:

	2022				2021
	Number of		Weighted Average		Number of		Weighted Average
	Options		Exercise Price		Options		Exercise Price
Options Outstanding at Beginning of the year		3,956,827	$	6.20		3,860	$	302.55
Granted		764,435		0.59		3,953,067		5.95
Cancelled		3,600,000		5.95		-		-
Forfeited		-		-		100		625.00
Options Outstanding at End of Year		1,121,262	$	3.26		3,956,827	$	6.20
Options Exercisable at End of Year		182,660	$	11.88		3,760	$	302.55

The 2015 Omnibus Incentive Plan provided for the issuance of stock options, stock appreciation rights, performance shares, performance units, restricted stock, restricted stock units, shares of our common stock, dividend equivalent units, incentive cash awards or other awards based on our common stock. This plan was reconstituted into a new 2021 Omnibus Plan. The 2021 Omnibus Plan is intended to allow us to continue to use equity awards as part of our ongoing compensation strategy for our key employees. Awards under the Plan will support the creation of long-term value and returns for our stockholders.

Awards may be granted alone or in addition to, in tandem with, or (subject to the 2021 Omnibus Incentive Plan’s prohibitions on repricing) in substitution for any other award (or any other award granted under another plan of ours or of any of our affiliates).

The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions. The model requires the use of subjective assumptions. Expected volatility was based on the historical and expected volatility of the Company. The expected life (in years) was determined using historical data to estimate options exercise patterns. The Company does not expect to pay any dividends for the foreseeable future thus a value of zero was used in the calculation. The risk-free interest rate was based on the rate for US Treasury bonds commensurate with the expected term of the granted options. The Company recognizes this value as an expense over the period in which the stock options vest.

The maximum term of an option is 10 years from the date of grant.

Option Awards – Fiscal Year 2021

In October 2021 the Company granted to its directors a total of 68,067 stock options at an exercise price of $5.95 per share that expire after 10 years. These awards will vest over a twelve month period with 50% after 6 months and the remaining 50% at end of twelve months. The grant date fair value of the options was $5.43.

The options awarded to the directors were valued using the Black-Scholes option pricing model. Total expense to be recognized after adjusting for forfeitures for the director options for these 2021 awards is approximately $332,600.

Significant assumptions used in the option-pricing model to fair value options granted were as follows:

	2021
Risk-free rate		1.23	%
Expected life	5.37 years
Expected volatility		128	%
Expected dividend		—

In October 2021 the Company granted to its employees a total of 3,885,000 stock options at an exercise price of $5.95 per share that expire after 10 years. These awards will vest and become exercisable with respect to one third (1/3) of the total option shares on the

first anniversary the issue date, and one thirty sixth (1/36) of the total option shares on the last day of each month thereafter (beginning with the first full month after the month in which the first anniversary of the vesting issue date occurs) but accelerate vesting if the share price exceeds $12.00 per share for ten consecutive trading days. The average grant date fair value of the options was $4.85.

The options awarded to its employees in 2021 were valued using the Monte Carlo option pricing model due to a market condition.

Significant assumptions used in the option-pricing model to fair value options granted were as follows:

	2021
Risk-free rate		1.58	%
Cost of Equity		15.56	%
Expected volatility		123.42	%
Price Hurdle	$	12.00
Expected life	10 years
Expected dividend		—

On November 18, 2022, the Company and the CEO and CFO agreed to cancel options representing 3.6 million shares that were issued in October 2021 with a an exercise price of $5.95 per share. The cancellation was treated as a settlement for no consideration and all remaining unrecognized compensation as of the date of cancellation was accelerated. This resulted in recognition of approximately $5.3 million of stock compensation expense associated with the award cancellation.

Option Awards – Fiscal Year 2022

In December 2022 the Company granted to a director a total of 37,314 stock options at an exercise price of $0.67 per share that expire after 10 years. In December 2022 the Company granted to its directors a total of 727,121 stock options at an exercise price of $0.59 per share that expire after 10 years. Both of these awards will vest over a twelve month period with 50% after 6 months and the remaining 50% at end of twelve months. The grant date fair value of the options was $0.58 and $0.50, respectively.

The options awarded to the directors were valued using the Black-Scholes option pricing model. Total expense to be recognized after adjusting for forfeitures for the director options for these 2022 awards is approximately $409 thousand.

Significant assumptions used in the option-pricing model to fair value options granted were as follows:

	2022
Risk-free rate	3.53% - 3.83%
Expected volatility		119	%
Expected life	10 years
Expected dividend		—

Compensation expense recognized for stock options for the years ended December 31, 2022 and 2021 was approximately $16.6 million and $2.3 million, respectively. The remaining unrecognized compensation cost associated with unvested stock options as of December 31, 2022 and 2021 is approximately $0.6 million and $16.8 million, respectively.

At December 31, 2022 and 2021, the stock options had a remaining life of approximately 9.6 years and 9.8 years, respectively.

The aggregate intrinsic value of the outstanding common stock options as of December 31, 2022 and 2021 was $0 and $0 respectively.