Stockholders

Equity

Convertible Preferred Stock

We are authorized to issue up to

10,000,000

shares of our Preferred Stock,

$.01

par value, which

may

be issued in

one

or more series. The table below presents our issued and outstanding series of preferred stock as of

December 31, 2020

and

2019.

Each series of our outstanding preferred stock has a stated value of

$1,000

per share. Further details concerning each series of preferred stock, and the changes in each series during the years ended

December 31, 2020

and

2019

are discussed in the sections that follow the table.

	December 31, 2020				December 31, 2019
			Carrying				Carrying
	Shares		Value		Shares		Value
Series B Convertible Preferred Stock		100	$	76,095		100	$	76,095
Series H Convertible Preferred Stock		-		-		1,686		1,156,338
Series I Convertible Preferred Stock		-		-		700		700,000
Total		100	$	76,095		2,486	$	1,932,433

Series B Convertible Preferred Stock

–

Our Series B Convertible Preferred Stock,

$1,000

stated value (“Series B Preferred Stock”), has rights and privileges as set forth in the pertinent Certificate of Designation of Preferences, Rights and Limitations, including a liquidation preference equal to the stated value per share. The Series B Preferred Stock has

voting rights and is

not

entitled to a dividend. As of

December 31, 2020,

there were

100

shares of Series B Preferred Stock outstanding, convertible at any time at the option of the holder into shares of common stock at a fixed conversion price of

$7,000,000

per common share.

Series C Convertible Preferred Stock

–

Our Series C Convertible Preferred Stock,

$1,000

stated value (“Series C Preferred Stock”), has rights and privileges as set forth in the pertinent Certificate of Designation of Preferences, Rights and Limitations, including a liquidation preference equal to the stated value per share. The Series C Preferred Stock has

voting rights and is

not

entitled to a dividend. During

2019,

587

shares of our Series C Preferred Stock were converted into

shares of our common stock and the remaining

1,563

shares of Series C Preferred Stock were exchanged for Series F Preferred Stock. As of

December 31, 2020,

there were

shares of Series C Preferred Stock outstanding.

Series E Convertible Preferred Stock

– Our Series E Convertible Preferred Stock,

$1,000

stated value, (“Series E Preferred Stock”) has rights and privileges as set forth in the pertinent Certificate of Designation of Preferences, Rights and Limitations, including a liquidation preference equal to the stated value per share. The Series E Preferred Stock has

voting rights and is

not

entitled to a dividend. During

2019,

all outstanding shares of Series E Preferred Stock (

1,200

shares) were exchanged for Series F Preferred Stock. As of

December 31, 2020,

there were

shares of Series E Preferred Stock outstanding.

Series F Preferred Stock

–

February 2019,

we entered into Exchange Agreements with holders of our Series C and Series E Preferred Stock, pursuant to which the holders exchanged all shares of Series C and Series E Preferred Stock held by them for an aggregate of

2,763

shares of Series F Convertible Preferred Stock (“Series F Preferred Stock”). Our Series F Preferred Stock has rights and privileges as set forth in the pertinent Certificate of Designation of Preferences, Rights and Limitations, including a liquidation preference equal to the stated value per share. The Series F Preferred Stock has

voting rights and is

not

entitled to a dividend. During

2019,

507

shares of Series F Preferred Stock were converted into

shares of our common stock and all remaining outstanding shares of Series F Preferred Stock (

2,256

shares) were exchanged for Series H Preferred Stock. As of

December 31, 2020,

there were

shares of Series F Preferred Stock outstanding.

Series G Preferred Stock

–

February 2019,

we entered into a Securities Purchase Agreement with the purchasers identified therein (the “Purchasers”) providing for sale to the Purchasers of an aggregate of up to

1,000

shares of our Series G Convertible Preferred Stock (“Series G Preferred Stock”) and related warrants for gross proceeds of up to

$1.0

million, which was funded at

three

different closings. Our Series G Preferred Stock has rights and privileges as set forth in the pertinent Certificate of Designation of Preferences, Rights and Limitations, including a liquidation preference equal to the stated value per share. The Series G Preferred Stock has

voting rights and is

not

entitled to a dividend. At the

first

closing, which occurred in

February 2019,

we issued

500

shares of Series G Preferred Stock in exchange for the payment by the Purchasers of

$250,000

in the aggregate, plus the cancellation of Term Notes held by the Purchasers in the amount of

$250,000.

At the

second

and

third

closings, which occurred in

April

and

June 2019,

we issued an aggregate of

500

additional shares of Series G Preferred Stock in exchange for the payment by the Purchasers of a total of

$500,000

During

July 2019,

all outstanding shares of Series G Preferred Stock (

1,000

shares) were exchanged for Series H Preferred Stock. As of

December 31, 2020,

there were

shares of Series G Preferred Stock outstanding.

Series H Preferred Stock

–

July 2019,

we entered into Exchange Agreements with holders of our Series F and Series G Preferred Stock, pursuant to which the holders exchanged all shares of Series F and Series G Preferred Stock held by them for an aggregate of

3,256

shares of Series H Convertible Preferred Stock (“Series H Preferred Stock”). Our Series H Preferred Stock has rights and privileges as set forth in the pertinent Certificate of Designation of Preferences, Rights and Limitations, including a liquidation preference equal to the stated value per share. The Series H Preferred Stock has

voting rights and is

not

entitled to a dividend. During

2019,

1,570

shares of Series H Preferred Stock were converted into

14,808

shares of our common stock. During

2020,

1,686

shares of our Series H Convertible Preferred Stock were converted into

469,697

shares of our common stock. As of

December 31, 2020,

there were

shares of Series H Preferred Stock outstanding.

Series I Preferred Stock

–

July 2019,

we entered into a Securities Purchase Agreement with the purchasers identified therein (the “Purchasers”) providing for sale to the Purchasers of an aggregate of

700

shares of our Series I Convertible Preferred Stock (“Series I Preferred Stock”) for gross proceeds of

$700,000.

Our Series I Preferred Stock has rights and privileges as set forth in the pertinent Certificate of Designation of Preferences, Rights and Limitations, including a liquidation preference equal to the stated value per share. The Series I Preferred Stock has

voting rights and is

not

entitled to a dividend. During

2020,

700

shares of our Series I Convertible Preferred Stock were converted into

204,371

shares of our common stock. As of

December 31, 2020,

there were

shares of Series I Preferred Stock outstanding.

Series J Preferred Stock

–

January 2020,

we entered into a Securities Purchase Agreement with the purchasers identified therein (the “Purchasers”) providing for sale to the Purchasers of an aggregate of

300

shares of our Series J Convertible Preferred Stock (“Series J Preferred Stock”) for gross proceeds of

$300,000.

Our Series J Preferred Stock has rights and privileges as set forth in the pertinent Certificate of Designation of Preferences, Rights and Limitations, including a liquidation preference equal to the stated value per share. The Series J Preferred Stock has

voting rights and is

not

entitled to a dividend. During

2020,

300

shares of Series J Preferred Stock were converted into

42,723

shares of our common stock. As of

December 31, 2020,

there were

shares of Series J Preferred Stock outstanding

Common Stock

Reverse Stock Splits

– On

April 30, 2019,

we effected a

-for-

500

reverse stock split of our common stock, on

January 21, 2020,

we effected a

-for-

2000

reverse split of our common stock and on

September 25, 2020,

we effected a

-for-

reverse split of our common stock.

Conversions of Preferred Stock

– During

2020

and

2019

we issued an aggregate of

716,790

and

14,819

shares of our common stock, respectively, pursuant to the conversion of several series of our convertible preferred stock as discussed above.

Public Offering

–

September 24, 2020,

we entered into an Underwriting Agreement (the “Underwriting Agreement”) with Maxim Group LLC, as representative of the underwriters (the “Representative”), for an underwritten public offering (the “Offering”) of an aggregate of

2,560,000

units of our equity securities (the “Units”). The Offering closed on

September 29, 2020,

with gross proceeds to us of approximately

$12.8

million; net proceeds after deducting underwriting discounts and commissions and other offering expenses were approximately

$11.2

million.

Of the

2,560,000

Units sold in the Offering: (a)

2,310,000

Units consist of

one

share of our common stock, and a Warrant to purchase

one

share of common stock (each, a “Unit Warrant”); and (b)

250,000

Units consisting of a Pre-Funded Warrant to purchase

one

share of common stock and a Unit Warrant. The Pre-Funded Warrants provided the holder the right to purchase

one

share of common stock at an exercise price of

$0.01

per share and were exercised in full during

October 2020.

The Unit Warrants provide the holder the right to purchase

one

share of common stock, are immediately exercisable at an exercise price of

$5.00

per share and expire

five

years after the issuance date. The public offering price was

$5.00

per Unit (

$4.99

for each Unit including a Pre-Funded Warrant).

Pursuant to the Underwriting Agreement, we issued to the Representative, as a portion of the underwriting compensation, warrants to purchase up to a total of

128,000

shares of common stock (the “Representative Warrants”). The Representative Warrants have an exercise price of

$5.50

per share, are initially exercisable

180

days after the effective date of the Offering and have a term of

three

years from their initial exercise date.

Conversion of Deferred Compensation to Equity

–

From

2016

through

August 2020,

to help conserve the Company's cash resources, our executive officers and non-employee directors agreed to defer receipt of all or a portion (at varying levels) of their respective cash compensation. On

September 29, 2020,

upon our consummation of the Offering,

$1,500,000

of the accumulated deferrals were converted at the

$5.00

offering price, resulting in the issuance of

300,001

units substantially similar to the units sold in the public offering, with each unit consisting of

one

share of our common stock and

one

warrant substantially similar to a Unit Warrant (a “Management Warrant”).

Conversion of Convertible Debentures to Equity

– As discussed in Note

upon our consummation of the Offering, we issued an aggregate of

177,626

shares of our common stock,

126,042

Pre-Funded Warrants and

303,668

Conversion Warrants upon the mandatory conversion of

$1,214,667

of Convertible Debentures and accrued interest.

Other Common Stock Transactions

– During

2020

and

2019

we issued

26,581

and

162

shares, respectively, of our common stock pursuant to consulting agreements. During

2020,

certain warrants were exercised using the “cashless” exercise feature of the warrants, resulting in the issuance of an aggregate of

36,902

shares of our common stock.

Stock Options

We have a stock-based incentive plan (the

“2020

Plan”) pursuant to which our Board of Directors

may

grant stock options to our employees. A total of

1,000,000

shares of our common stock are reserved for issuance pursuant to the

2020

Plan. The exercise price for any option granted

may

not

be less than fair value (

110%

of fair value for ISO's granted to certain employees). Options have a maximum

ten

-year term and generally vest over

three

years.

We use the Black-Scholes model for determining the grant date fair value of our stock option grants. This model utilizes certain information, such as the interest rate on a risk-free security with a term generally equivalent to the expected life of the option being valued and requires certain other assumptions, such as the expected amount of time an option will be outstanding until it is exercised or expired, to calculate the fair value of stock options granted. The significant assumptions we used in our fair value calculations were as follows:

	2020			2019
Weighted average risk-free interest rates		0.69	%		N/A
Expected dividend yield		0.0	%		N/A
Expected life of option (years)	7.0				N/A
Expected volatility		38.16	%		N/A

A summary of stock option activity under the

2020

Plan as of

December 31, 2020,

and changes during the year then ended is presented below.

	Number of Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (yrs)		Aggregate Intrinsic Value
Outstanding at December 31, 2019		-	$	-
Granted		602,000		2.79
Exercised		-		-
Forfeited or expired		-		-
Outstanding at December 31, 2020		602,000	$	2.79		9.9	$	355,180
Exercisable at December 31, 2020		-0-	$	-		-	$	-

The weighted-average grant date fair value of options granted during

2020

was

$1.12.

stock options were granted during

2019.

Total employee and director stock-based compensation expense recognized in the consolidated statement of operations for the years ended

December 31, 2020

and

2019

was

$18,730

and

$104,420,

respectively. As of

December 31, 2020,

there is

$655,510

of unrecognized compensation expense related to employee and director stock-based compensation arrangements that will be recognized over a weighted-average period of

2.9

years.

Stock Purchase Warrants

Summary of Warrants Outstanding

– The table below presents summary information about our warrants outstanding as of

December 31, 2020.

Additional information concerning the warrants follows the table.

Warrant Description	Number of Shares		Exercise Price		Expiration
Series I Warrants		62,626	$	5.00	Oct-Dec 2024
June 2020 Warrants		120,000		5.00	Jun 2025
Pre-Funded Warrants		126,042		0.01	Perpetual
Unit, Conversion and Management Warrants		3,163,669		5.00	Sep 2025
Representative Warrants		128,000		5.50	Mar 2024
Total Warrants Outstanding at December 31, 2020		3,600,337

Weighted-Average Exercise Price	$	4.84
Weighted-Average Remaining Life (excluding Pre-Funded Warrants) (years)	4.7

Series I Warrants

– During

July 2020,

Series I Warrants were exercised using the “cashless” exercise feature of the warrants, resulting in the issuance of

29,755

shares of our common stock. As of

December 31, 2020,

there were

62,626

Series I Warrants outstanding, with an exercise price of

$5.00

per share, reflective of anti-dilution adjustments resulting from the Offering.

June 2020

Warrants

– As discussed in Note

June 26, 2020,

in connection with the issuance of the Convertible Debentures, we issued warrants to purchase

120,000

shares of common stock, with a

five

-year term and an exercise price of

$10.00.

As a result of the Offering, on

September 29, 2020

the exercise price was reduced to

$5.00.

Warrants Issued Upon Conversion of Convertible Debentures

– As discussed in Note

September 29, 2020,

upon the conversion of the Convertible Debentures into our equity securities, we issued

126,042

Pre-Funded Warrants and

303,668

Conversion Warrants to purchase our common stock.

Warrants Issued Upon Conversion of Deferred Compensation

– As discussed above under “

Common Stock

–

Conversion of Deferred Compensation to Equity

”, on

September

29,

2020,

upon the conversion of amounts owed to current and former executive officers and directors, we issued Management Warrants to purchase

300,001

shares of common stock.

Warrants Issued in Connection with Public Offering

– As discussed above under “

Common Stock

–

Public Offering

”, on

September 29, 2020,

in connection with the Offering, we issued Unit Warrants to purchase

2,560,000

shares of common stock, Pre-Funded Warrants to purchase

250,000

shares of common stock (fully exercised in

October 2020),

and Representative Warrants to purchase

128,000

shares of common stock.

Additional Stock-Based Compensation Expense

In addition to stock-based compensation expense related to the

2020

Plan (see

Stock Options

above), during the years ended

December 31, 2020

and

2019,

we recognized

$45,733

and

$223,080,

respectively, of expense related to the issuance of our common stock pursuant to consulting and investment banking agreements. As of

December 31, 2020,

there is

$48,667

recorded as a prepaid expense for

one

of these arrangements, which will be recognized as expense during

2021

over the term of the related agreement.