Sold and issued warrants are subject to the provisions of FASB ASC 815-10, the Company utilized a Black-Scholes options pricing model to value the warrants sold and issued. This model requires the input of highly subjective assumptions such as the expected stock price volatility and the expected period until the warrants are exercised. When calculating the value of warrants issued, the Company uses a volatility factor of 100%, a risk free interest rate and the life of the warrant for the exercise period.

 

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

 

		Number of Shares				Weighted Average Exercise Price				Weighted Average Remaining Contractual Life (years)				Aggregate Intrinsic Value
December 31, 2017			7,237,763			$	0.51				1.35
Grants			860,000				0.70				5.00
Expirations			(3,992,365	)			0.46				-
December 31, 2018			4,105,398				0.59				1.79				-
Grants			3,600,000				0.70				5.00
Expirations			(2,015,020	)			0.69				-
December 31, 2019			5,690,378				0.63				3.72				-
Warrants exercisable at:
December 31, 2018			4,105,398				0.59				1.79				-
December 31, 2019			5,690,378				0.63				3.72				-

 

The following table summarizes information about common stock warrants outstanding at December 31, 2019:

 

Outstanding																Exercisable
Exercise Price				Number Outstanding				Weighted  Average  Remaining Contractual  Life (years)				Weighted Average Exercise Price				Number Exercisable				Weighted Average Exercise Price
$	0.70				4,460,000				4.45			$	0.70				4,460,000			$	0.70
	0.45				150,000				0.92				0.45				150,000				0.45
	0.35				1,080,378	*			1.13				0.35				1,080,378				0.35
$	0.35 - $0.70				5,690,378				3.72			$	0.63				5,690,378			$	0.63

 

* 205,000 warrants exercisable at $0.35 contain dilution protections that increase the number of shares purchasable at exercise upon the issuance of securities at a price below the current exercise price.

 

The Company utilized the Black-Scholes options pricing model. The assumptions used for warrants granted during the years ended December 31, 2019 and 2018 are as follows:

 

		December 31, 2019		December 31, 2018
Exercise price		$0.70		$0.70
Expected dividends		0%		0%
Expected volatility		100% - 112%		100%
Risk free interest rate		1.58% - 3%		3%
Expected life		5 years		5 years

 

On June 15, 2018, the Company issued unsecured convertible notes and warrants to unaffiliated accredited investors totaling $560,000 in exchange for outstanding secured convertible notes payable. The notes are convertible into one share of common stock, with the initial conversion ratio equal to $0.50 per share. The investors received a total of 560,000 warrants to purchase one shares of common stock with an exercise price of $0.70 per share. These securities were sold in reliance upon the exemption provided by Section 4(a)(2) of the Securities Act and the safe harbor of Rule 506 under Regulation D promulgated under the Securities Act, as well as under Section 3(a)(9) under the Securities Act. Using a Black-Scholes Valuation model these warrants had a value of $89,450 which was recorded as a discount on the notes payable and will be amortized over the life of the associated notes payable.

 

On August 31, 2018, the Company issued unsecured convertible notes and warrants to unaffiliated accredited investors totaling $200,000. The notes are convertible into one share of common stock, with the initial conversion ratio equal to $0.50 per share. The investors received a total of 200,000 warrants to purchase one shares of common stock with an exercise price of $0.70 per share. These securities were sold in reliance upon the exemption provided by Section 4(a)(2) of the Securities Act and the safe harbor of Rule 506 under Regulation D promulgated under the Securities Act. Using a Black-Scholes Valuation model these warrants had a value of $28,900 which was recorded as a discount on the notes payable and will be amortized over the life of the associated notes payable.

 

On October 31, 2018, the Company issued unsecured convertible notes and warrants to unaffiliated accredited investors totaling $100,000. The notes are convertible into one share of common stock, with the initial conversion ratio equal to $0.50 per share. The investors received a total of 100,000 warrants to purchase one shares of common stock with an exercise price of $0.70 per share. These securities were sold in reliance upon the exemption provided by Section 4(a)(2) of the Securities Act and the safe harbor of Rule 506 under Regulation D promulgated under the Securities Act. Using a Black-Scholes Valuation model these warrants had a value of $11,450 which was recorded as a discount on the notes payable and will be amortized over the life of the associated notes payable.

 

On August 12, 2019, the Company issued 37,210 shares of common stock upon the cashless exercise of warrants to purchase 167,039 shares of common stock for $0.35 per share based on a market value of $0.45 per share as determined under the terms of the warrant.

 

From June through October 2019, the Company issued unsecured convertible notes and five-year warrants to unaffiliated accredited investors totaling $2,600,000. The notes are convertible into shares of common stock, with the initial conversion ratio equal to $0.50 per share. The investors received warrants to purchase a total of 2,600,000 shares of common stock with an exercise price of $0.70 per share. These securities were sold in reliance upon the exemption provided by Section 4(a)(2) of the Securities Act and the safe harbor of Rule 506 under Regulation D promulgated under the Securities Act. Using a Black-Scholes Valuation model these warrants had a value of $525,142 which was recorded as a discount on the notes payable and will be amortized over the life of the associated notes payable.

 

On October 23, 2019, and pursuant to an advisory agreement executed on that date for a term of one year with an unaffiliated third party, the Company granted such unaffiliated third party a vested three-year warrant to purchase 1,000,000 shares of common stock with an exercise price of $0.70 per share, exercisable on a cash basis only. Such warrants were issued as and for the entire compensation to paid to the advisor for all services to be rendered during the term. Based on a Black-Scholes valuation model, these options were valued at $243,294 in accordance with FASB ASC Topic 718. The fair value of the option will be amortized to selling, general and administrative expenses within the Company’s consolidated statements of operations over one year.