NOTE 16 – EQUITY

Authorized Capital

As of December 31, 2019, the Company was authorized to issue 14,285,714 shares of $0.0001 par value per share common stock. The holders of the Company’s common stock are entitled to one vote per share.

Common Stock Issuances

During the year ended December 31, 2018, the Company sold 180,000 shares of common stock of the company to various investors at a purchase price of $1.00 per share providing $180,000 of proceeds to the Company.

See Note 11 – Notes Payable – 15% Senior Secured Convertible Promissory Notes, 12% Secured Convertible Notes, and Other Convertible for details related to stock issuances in connection with conversions of notes for the year ended December 31, 2019. See Note 15 – Commitments and Contingencies – Consulting Agreements and Board Compensation for details related to additional stock issuances for the year ended December 31, 2019.

Stock Option and Stock Issuance Plan

2017 Plan

The Company’s board of directors and shareholders adopted and approved on July 27, 2017 and September 21, 2017, respectively, the Stock Option and Stock Issuance Plan (“2017 Plan”), effective September 21, 2017, under which stock options and restricted stock may be granted to officers, directors, employees and consultants. Under the 2017 Plan, the Company reserved 153,061 shares of common stock for issuance. Upon the adoption of our 2019 Equity Incentive Plan, we will no longer issue awards under the 2017 Plan, but any existing awards granted to our management team and Board of Directors will remain outstanding under the 2017 Plan.

2019 Plan

The Company’s board of directors and shareholders approved and adopted on October 28, 2019 the 2019 Equity Incentive Plan (“2019 Plan”), effective on October 28, 2019 under which stock options and restricted stock may be granted to officers, directors, employees and consultants in the form of non-qualified stock options, incentive stock-options, , stock appreciation rights, restricted stock awards, restricted stock Units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. Under the 2019 Plan, the Company reserved 214,286 shares of common stock for issuance. As of the date of the issuance of these consolidated financial statements no shares have been issued under the 2019 Plan.

Warrant and Option Valuation

The Company has computed the fair value of warrants and options granted using the Black-Scholes option pricing model. The expected term used for warrants and options issued to non-employees is the contractual life. The Company is utilizing an expected volatility figure based on a review of the historical volatilities, over a period of time, equivalent to the expected life of the instrument being valued, of similarly positioned public companies within its industry. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued.

Restricted Common Stock

During September 30, 2018, the Company issued 35,714 restricted common stock of the Company to a consultant with an aggregate fair value of $250,000. The shares are fully vested on the date of grant. During the year ended December 31, 2019, the Company issued an aggregate of 61,426 restricted common stock of the Company to consultants with an aggregate fair value of $430,000. See Note 15 – Commitments and Contingencies – Consulting Agreements.

At December 31, 2019, the unamortized value of the restricted common stock was $80,898. The unamortized amount will be expensed over a weighted average period of 1.01 years. A summary of the activity related to the restricted common stock for the years ended December 31, 2019 and December 31, 2018 is presented below:

Stock-Based Compensation Expense

Stock-based compensation related to restricted stock issued to employees, directors and consultants amounted to $666,504 and $383,966 for the years ended December 31, 2019 and 2018, respectively, of which $78,455 and $380,871, respectively, was recorded in general and administrative expenses, $2,700 and $3,094, respectively, was recorded in labor expense with restaurant operating expenses and $585,349 and $0, respectively, was recorded in consulting expenses.

Warrants

A summary of warrants activity during the years ended December 31, 2019 and 2018 is presented below:

The grant date fair value of warrants granted during the years ended December 31, 2019 and 2018 was determined on the date of issuance using the Black-Scholes option pricing model with the following assumptions: expected volatility, dividend rate, risk free interest rate and the expected life. The Company calculates the expected volatility using the historical volatility of comparable companies over the most recent period equal to the expected term and evaluates the extent to which available information indicates that future volatility may differ from historical volatility. The expected dividend rate is zero as the Company does not expect to pay or declare any cash dividends on common stock. The risk-free rates for the expected terms of the stock options are based on the U.S. Treasury yield curve in effect at the time of the grant. The Company has not experienced significant exercise activity on stock options. Due to the lack of historical information, the Company determined the expected term of its stock option awards issued using the simplified method. In applying the Black-Scholes option pricing model, the Company used the following assumptions: