General form of registration statement for all companies including face-amount certificate companies

Stockholders' (Deficit)

v3.21.1
Stockholders' (Deficit)
12 Months Ended
Dec. 31, 2020
Equity [Abstract]  
Stockholders' (Deficit)

Note 8 - Stockholders’ (Deficit)

 

Capital Stock

 

The Company has 260,000,000 authorized shares of capital stock, consisting of 250,000,000 shares of common stock, par value $0.001, and 10,000,000 shares of Preferred Stock, par value $0.001 per share.

 

Common Stock Options

 

2010 Incentive Award Plan

 

On August 12, 2010, the Company adopted the Data Storage Corporation 2010 Incentive Award Plan (the “2010 Plan”) that provided for 2,000,000 shares of common stock reserved for issuance under the terms of the 2010 Plan; which was amended on September 25, 2013 to increase the number of shares of common stock reserved for issuance under the Plan to 5,000,000 shares of common stock; which was further amended on June 20, 2017 to increase the number of shares of common stock reserved for issuance under the Plan to  8,000,000 shares of common stock; and further amended on July 1, 2019 to increase the number of shares of common stock reserved for issuance under the Plan to  10,000,000 shares of common stock. On April 23, 2012, the Company amended and restated the 2010 Plan to change the name to the “Amended and Restated Data Storage Corporation Incentive Award Plan” (the “Plan”). The Plan was intended to promote the interests of the Company by attracting and retaining exceptional employees, consultants, directors, officers and independent contractors (collectively referred to as the “Participants”) and enabling such Participants to participate in the long-term growth and financial success of the Company. Under the Plan, the Company had the right to grant stock options, which are intended to qualify as “incentive stock options” under Section 422 of the Internal Revenue Code of 1986, as amended, non-qualified stock options, stock appreciation rights and restricted stock awards, which were restricted shares of common stock (collectively referred to as “Incentive Awards”). Incentive Awards were granted pursuant to the Plan for 10 years from the Effective Date. There are 8,305,985 options outstanding under the Plan as of December 31, 2020. The 2010 Plan expired on October 21, 2020 and accordingly, there are no shares available for future grants. 

 

If an incentive award granted under the Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to us in connection with an incentive award, the shares subject to such award and the surrendered shares will become available for future awards under the Plan. The number of shares subject to the Plan, and the number of shares and terms of any Incentive Award may be adjusted in the event of any change in our outstanding common stock by reason of any stock dividend, spin-off, stock split, reverse stock split, recapitalization, reclassification, merger, consolidation, liquidation, business combination or exchange of shares, or similar transaction.

 

A summary of the Company’s option activity and related information follows:

 

    Number of
Shares
Under Options
    Range of
Option Price
Per Share
    Weighted
Average
Exercise Price
  Weighted
Average
Contractual
Life
Options Outstanding at January 1, 2019     5,765,519     $ 0.02 – 0.65     $ 0.26   6.8
Options Granted     2,852,537       0.05       0.05    
Exercised     (100,000 )     0.05       0.05    
Expired/Cancelled     (92,232 )     0.05       0.05    
Options Outstanding at December 31, 2019     8,425,824     $ 0.05 – 0.65     $ 0.17   7.5
Options Granted     350,000       0.12 – 0.13       0.13    
Exercised     (100,000 )     0.05       0.05    
Expire/Cancelled     (369,838 )     0.35 – 0.36       0.36    
Options Outstanding at December 31, 2020     8,305,986     $ 0.05 – 0.39     $ 0.13   6.6
                           
Options Exercisable at December 31, 2020     5,227,220     $ 0.05 – 0.39     $ 0.17   5.5

 

Share-based compensation expense for options totaling $158,728 and $15,342 was recognized in our results for the year ended December 31, 2020 and 2019, respectively based on awards vested.

 

The valuation methodology used to determine the fair value of the options issued during the year was the Black-Scholes option-pricing model. The Black-Scholes model requires the use of a number of assumptions including volatility of the stock price, the average risk-free interest rate, and the weighted average expected life of the options.

 

The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the term of the options.

 

Estimated volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate each year during the expected life of the award. The Company’s calculation of estimated volatility is based on historical stock prices of these peer entities over a period equal to the expected life of the awards. The Company uses the historical volatility of peer entities due to the lack of sufficient historical data of its stock price.

 

As of December 31, 2020, there was $264,111 of total unrecognized compensation expense related to unvested employee options granted under the Company’s share-based compensation plans that is expected to be recognized over a weighted average period of approximately 3 year.

 

The weighted average fair value of options granted, and the assumptions used in the Black-Scholes model during the year ended December 31, 2020 and 2019 are set forth in the table below.

 

    2020   2019
Weighted average fair value of options granted   $ 0.13     $ 0.05  
Risk-free interest rate     0.66-0.83 %     1.79 %
Volatility     221 – 223 %     225 %
Expected life (years)     10       10  
Dividend yield     0.00 %     0.00 %

 


Common Stock Warrants

 

A summary of the Company’s warrant activity and related information follows:

 

    Number of
Shares Under
Warrants
    Range of
Warrants
Price
Per Share
    Weighted
Average
Exercise Price
    Weighted
Average
Contractual
Life
 
Warrants Outstanding at January 1, 2019     133,334     $ 0.01     $ 0.01       5.5  
Warrants Granted                          
Warrants Outstanding at December 31, 2019     133,334     $ 0.01     $ 0.01       4.5  
Warrants Granted                          
Warrants Outstanding at December 31, 2020     133,334     $ 0.01     $ 0.01       3.5  
Warrants Exercisable at December 31, 2020     133,334     $ 0.01     $ 0.01       3.5  

 

Preferred Stock

 

Liquidation preference

 

Upon any liquidation, dissolution, or winding up of the Corporation, whether voluntary or involuntary, before any distribution or payment shall be made to the holders of any Common Stock, the holders of Series A Preferred Stock shall be entitled to be paid out of the assets of the Corporation legally available for distribution to stockholders, for each share of Series A Preferred Stock held by such holder, an amount per share of Series A Preferred Stock equal to the Original Issue Price for such share of Series A Preferred Stock plus all accrued and unpaid dividends on such share of Series A Preferred Stock as of the date of the Liquidation Event.

 

Conversion

 

The number of shares of Common Stock to which a share of Series A Preferred Stock may be converted shall be the product obtained by dividing the Original Issue Price of such share of Series A Preferred Stock by the then-effective Conversion Price (as defined herein) for such share of Series A Preferred Stock. The Conversion Price for the Series A Preferred Stock shall initially be equal to $0.02 and shall be adjusted from time to time.

 

Voting

 

Each holder of shares of Series A Preferred Stock shall be entitled to the number of votes, upon any meeting of the stockholders of the Corporation (or action taken by written consent in lieu of any such meeting) equal to the number of shares of Class B Common Stock into which such shares of Series A Preferred Stock could be converted. 

 

Dividends

 

Each share of Series A Preferred Stock, in preference to the holders of all Common Stock (as defined below), shall entitle its holder to receive, but only out of funds that are legally available therefore, cash dividends at the rate of ten percent (10%) per annum from the Original Issue Date on the Original Issue Price for such share of Series A Preferred Stock, compounding annually unless paid by the Corporation. Accrued dividends at December 31, 2020 and 2019 were $1,115,674 and $970,997, respectively.