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. The expected 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. Due to a lack of historical information needed to estimate the Company’s expected term, it is estimated using the simplified method allowed.

The Company did not recognize any stock-based compensation expense related to warrants during the years ended December 31, 2019 and 2018, respectively.

Convertible note warrants

Warrants to purchase 16,900 shares of common stock at $14 to $40 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 $125,545.

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 $125 per share, and (ii) cash payment of $30 per share. This offering closed on July 27, 2018, and resulted in an exchange of 48,033 warrants and $1,440,043 in gross proceeds for 48,033 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 1,579 shares of common stock at $42 per share were issued to investment bankers for their services.

Warrant expiration

During the year ended December 31, 2019, warrants to purchase an aggregate of 94,577 shares of common stock expired. During the year ended December 31, 2018, warrants to purchase an aggregate of 510 shares of common stock expired.