Note 10. Stockholders’ Equity

Common Stock

The Company has 45,000,000 common shares authorized with a par value of $0.001 per share.

On July 17, 2019, we issued 65,789 shares of our common stock to a holder of our shares of Series A Convertible Preferred Stock upon the conversion of 25,000 of such shares of Series A Convertible Preferred Stock.

On September 9, 2019, we issued 200,000 shares of our common stock to a holder of our shares of Series A Convertible Preferred Stock upon the conversion of 76,000 of such shares of Series A Convertible Preferred Stock.

On September 16, 2019, we issued 43,081 shares of our common stock to a holder of our shares of Series A Convertible Preferred Stock upon the conversion of 16,371 of such shares of Series A Convertible Preferred Stock.

On September 16, 2019, we issued 108,422 shares of our common stock to a holder of our shares of Series A Convertible Preferred Stock upon the conversion of 41,200 of such shares of Series A Convertible Preferred Stock.

On September 25, 2019, we issued 73,156 shares of our common stock to the holders of Series A Convertible Preferred Stock in settlement of fees owed to such holders pursuant to the terms of such of the Series A Convertible Preferred Stock. The shares had a fair value of $250,000. 

On September 30, 2019, we issued 24,843 shares of our common stock to a former employee in settlement of litigation. The shares of common stock had a fair value of $75,000. 

On November 11, 2019 we issued 200,000 shares of our common stock to the holders of Series A Convertible Preferred Stock in settlement of fees owed to such holders pursuant to the terms of such of the Series A Convertible Preferred Stock. The shares had a fair value of $584,000. 

On November 20, 2019, we issued 25,000 shares of our common stock to a former employee in per the terms of a settlement agreement. The shares of common stock had a fair value of $73,250.

On December 5, 2019, we issued 50,000 shares of our common stock to a director as compensation. The shares of common stock had a fair value of $135,000.

On December 11, 2019 we issued 6,579 shares of our common stock to the holders of Series A Convertible Preferred Stock in settlement of fees owed to such holders pursuant to the terms of such of the Series A Convertible Preferred Stock. The shares had a fair value of $21,053. 

On December 23, 2019 we issued 9,211 shares of our common stock to the holders of Series A Convertible Preferred Stock in settlement of fees owed to such holders pursuant to the terms of such of the Series A Convertible Preferred Stock. The shares had a fair value of $26,343.

Series A Preferred Stock

On December 19, 2018, the Company authorized Series A Preferred Shares consisting of 900,000 authorized shares, with a par value of $0.001.

Transfer of Common Stock to Consultants

On or about February 1, 2019, the Company’s founder and CEO as well as another shareholder transferred an aggregate of approximately 1,379,000 and 144,000 shares of common stock, respectively to certain consultants of the Company, of which approximately 983,000 and 144,000 shares of common stock, respectively were sold to consultants in exchange for promissory notes. The Company accounted for these share transfers as stock-based compensation expense based upon the Black-Scholes model as if these were stock option grants made by the Company. The Company used the following inputs in the Black-Scholes option pricing model, expected life of 5 years, risk-free interest rate of 2.51%, volatility 92% and dividend yield of 0%. As a result, the Company recognized approximately $3.6 million of stock-based compensation expense during the first quarter of 2019 related to these share transfers. Additionally, approximately 396,000 shares of common stock were transferred by the founder and CEO to contractors for no consideration. The Company accounted for these share transfers as stock-based compensation based upon the underlying common stock price of $4.37 as of the date of transfer. The Company recognized approximately $1.7 million of stock-based compensation expense related to these transfers during the first quarter of 2019.

Stock Incentive Plan

In connection with Alliance’s acquisition of SCW FL Corp., the Company adopted Alliance’s Second Amended and Restated 2016 Equity Incentive Plan (“2016 Plan”). The 2016 Plan allows the Company to grant shares of the Company’s common stock to the Company’s directors, officers, employees and consultants. On January 30, 2019, the Alliance shareholders approved the amendment of the 2016 Plan to increase the number of shares of common stock available for issuance thereunder to 3,000,000 shares of common stock.

On February 13, 2019, the Board of Directors of the Company granted an aggregate of 425,000 restricted stock units (“RSUs”) under the 2016 Plan, of which an aggregate of 325,000 shares were granted to management and vest quarterly over the next three years, and of which 100,000 were issued to a consultant and vest quarterly over one year. Upon the effectiveness under the Securities Act of a registration statement on Form S-8 with respect to the shares covered by the 2016 Plan, these RSUs vest in twelve equal quarterly instalments, commencing on the grant date of February 13, 2019 and had a grant date fair value of approximately $2.7 million. The Company also granted an additional 525,000 RSUs which are subject to performance vesting, of which an aggregate of 225,000 shares were issued to management and 300,000 were issued to a consultant. The 225,000 shares issued to management were cancelled in April 2020, when the person’s employment with the Company terminated. Additionally, the board of directors awarded stock options under the 2016 Plan to each of the four independent board members to acquire an aggregate of 53,572 shares of the Company’s common stock and to an employee to acquire 25,000 shares. The stock options have a term of five years, an exercise price of $6.49 per share, vest quarterly over four quarters beginning on the grant date of February 13, 2019 and had a grant date fair value of $431,000. The Company determined the fair value of the stock options using the Black-Scholes model with the following inputs: expected life 10 years, risk-free interest rate 0.25%, dividend yield 0% and expected volatility 90%.

On December 5, 2019, the Company issued 50,000 RSU’s to a member of the board of directors. The RSU’s vested immediately and had a fair value of $135,000. Additionally, on December 10, 2019, the board of directors awarded stock options under the 2016 Plan to each of the three remaining independent directors to 50,000 shares of the Company’s common stock. The stock options have a term of five years, an exercise price of $2.64 per share, vest immediately on the grant date of December 10, 2019 and had a grant date fair value of $388,746. The Company determined the fair value of the stock options using the Black-Scholes model with the following inputs: expected life 10 years, risk-free interest rate 1.0%, dividend yield 0% and expected volatility 100%.

On June 28, 2019, the Company terminated the aforementioned consultant and reversed the stock-based compensation expense recognized during the first quarter 2019 totaling $162,250 as the consultant had not vested in any of the RSU’s.

On October 26, 2019, the employment of the Employee who received the 250,000 RSU’s on February 13, 2019, terminated and the remaining stock based compensation for the employee was cancelled as the employee had not vested in the shares.

The number of shares of the Company’s common stock that are issuable pursuant to warrant and stock option grants with time-based vesting as of and for the year ended December 31, 2019 are:

As of December 31, 2019 and 2018, the total unrecognized expense for unvested stock options and restricted stock awards, net of actual forfeitures, was approximately $3.2 million and $0, respectively, to be recognized over a three-year period for restricted stock awards and one year for option grants from the date of grant.

Stock-based compensation expense for the years ended December 31, 2019 and 2018 was as follows:

Stock-based compensation expense categorized by the equity components for the years ended December 31, 2019 and 2018 is as follows:

Stock compensation is included in general and administrative expenses on the consolidated statements of operations