NOTE 13 – WARRANTS

The following is a summary of the Company’s warrant activity:

The Company estimates the fair value of warrants granted on each grant date using the Black-Scholes option valuation model. Volatility is calculated based on the historical volatility of the Company. The risk-free interest rate used is based on the U.S. Treasury constant maturity rate in effect at the time of grant for the expected term of the warrants to be valued. The expected dividend yield is zero, because the Company does not anticipate paying a dividend within the relevant timeframe.

The Company did not recognize any stock-based compensation expense related to warrants during the three-months ended September 30, 2019 and 2018.

Convertible note warrants

Warrants to purchase 2,300,000 shares of common stock at $0.12 to $0.20 per share were issued in connection with the issuance of convertible notes. These warrants were immediately vested and expire in five years and were recorded as discounts on the convertible notes in the aggregate amount of $141,435.

Warrant exchange offering

In June 2018, the Company commenced an offering to exchange outstanding warrants for shares of common stock under a Form S-4 Registration Statement. These shares of common stock were issued to warrant holders in exchange for (i) their outstanding warrants to purchase shares of common stock at $0.625 per share, and (ii) cash payment of $0.15 per share. This offering closed on July 27, 2018, and resulted in an exchange of 9.6 million warrants and $1,440,043 in gross proceeds for 9,600,286 shares of common stock. Stock issuance costs associated with this capital raise totaled $196,006, resulting in a net total of $1,244,037 raised in this offering. As part of this offering, warrants to purchase 315,010 shares of common stock at $0.21 per share were issued to investment bankers for their services.

Warrant expiration

During the nine-months ended September 30, 2019, warrants to purchase an aggregate of 18,405,496 shares of common stock expired. During the year ended December 31, 2018, warrants to purchase an aggregate of 101,984 shares of common stock expired.