| Stock Options and Warrants |
The
Company periodically issues stock options and warrants to employees and non-employees in capital raising transactions, for services
and for financing costs. Options and warrants vest and expire according to terms established at the grant date.
Options
The
Company previously issued stock options to employees, directors and consultants under its 2004 Stock Option Plan (the Plan). The
Company could issue options under the Plan to acquire up to 7,000,000 shares of common stock as amended in May 2006. On March
2, 2014, the Plan expired and the Board decided not to extend it.
Employee
options vest according to the terms of the specific grant and expire from 5 to 10 years from date of grant. Non-employee
option grants vest upon issuance up to 2 years. The weighted-average, remaining contractual life of employee and Non-employee
options outstanding at December 31, 2015 was 5.2 years. Stock option activity for the period January 1, 2013 to December
31, 2015, was as follows:
| |
|
Weighted
Avg. Options
|
|
|
Weighted
Avg. Exercise
Price
|
|
| Options, January 1, 2013 |
|
|
27,278,098 |
|
|
$ |
0.27 |
|
| Options granted |
|
|
207,819 |
|
|
|
1.17 |
|
| Options exercised |
|
|
(115,000 |
) |
|
|
0.60 |
|
| Options forfeited |
|
|
(7,061,009 |
) |
|
|
0.25 |
|
| Options, December 31, 2013 |
|
|
20,309,908 |
|
|
$ |
0.28 |
|
| Options granted |
|
|
852,122 |
|
|
|
0.80 |
|
| Options exercised |
|
|
(20,000 |
) |
|
|
0.30 |
|
| Options forfeited |
|
|
(90,000 |
) |
|
|
0.91 |
|
| Options, December 31, 2014 |
|
|
21,052,030 |
|
|
$ |
0.20 |
|
| Options granted |
|
|
838,552 |
|
|
|
0.46 |
|
| Options exercised |
|
|
– |
|
|
|
– |
|
| Options forfeited |
|
|
(355,434 |
) |
|
|
0.72 |
|
| Options, December 31, 2015 |
|
|
21,535,148 |
|
|
$ |
0.30 |
|
The
weighted average exercise prices, remaining contractual lives for options granted, exercisable, and expected to vest under the
Plan as of December 31, 2015 were as follows:
| |
|
|
Outstanding Options |
|
|
Exercisable Options |
|
|
Option Exercise
Price Per
Share
|
|
|
Shares |
|
|
Life
(Years)
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Shares |
|
|
Weighted
Average
Exercise
Price
|
|
| $ 0.21 - $ 0.99 |
|
|
|
21,343,280 |
|
|
|
5.2 |
|
|
$ |
0.29 |
|
|
|
20,408,283 |
|
|
$ |
0.29 |
|
| $ 1.00 - $ 1.99 |
|
|
|
191,868 |
|
|
|
4.2 |
|
|
$ |
1.22 |
|
|
|
263,229 |
|
|
$ |
1.20 |
|
| |
|
|
|
21,535,148 |
|
|
|
|
|
|
$ |
0.30 |
|
|
|
20,671,512 |
|
|
$ |
0.30 |
|
As
of December 31, 2015 the market price of the Company’s stock was $0.19 per share. At December 31, 2015 the aggregate
intrinsic value of the options outstanding was $0. Future unamortized compensation expense on the unvested outstanding options
at December 31, 2015 is approximately $34,000.
2015
|
· |
From
January through July 2015, the Company issued options to purchase a total of 838,552
shares of common stock to employees, officers and members of the Board of Directors with
a fair value of $323,787 using the Black-Scholes Option Pricing model. The options are
exercisable from $0.65 up to $0.99 per share, vesting within one year and expiring in
ten years from the date of grant. During the year ended December 31, 2015, the Company
recognized compensation costs of $323,787 based on the fair value of options that vested. |
|
· |
During
the year ended December 31, 2015, the Company amortized $366,266 of compensation cost based
on the vesting of the options granted to employees and directors in prior years. |
2014
|
· |
In
February 2014, options to purchase 20,000 shares of common stock were exercised resulting
in proceeds of $6,000. |
|
· |
From
January up to October 2014, the Company issued options to purchase a total of 852,122
shares of common stock to employees, officers and members of the Board of Directors with
an estimated fair value of approximately $454,499 using the Black-Scholes Option Pricing
model. The options are exercisable from $0.65 up to $0.99 per share, vesting within two
years and expire in two and ten years from the date of grant. During the year ended December
31, 2014, the Company recognized compensation costs of $295,884 based on the fair value
of options that vested. |
|
· |
During
the year ended December 31, 2014, the Company amortized $376,247 of compensation cost based
on the vesting of the options granted to employees, directors and consultants in prior
years. |
2013
|
· |
From
April up to September 2013, options to purchase 115,000 shares of common stock were exercised
resulting in net proceeds of $19,500. Included in the exercise was issuance of 50,000
shares of common stock valued at $49,000 pursuant to an exercise of options and accounted
for as partial settlement of a liability recorded in prior years. |
|
· |
From
July up to September 2013, the Company issued options to purchase 207,819 shares of common
stock to consultants, employees, officers and members of the Board of Directors with
a fair value of approximately $201,000 using the Black-Scholes Option Pricing model.
The options are exercisable at $1.09/share up to $1.71/share, vest over a period of one
year and expire in two years and ten years from the date of grant. During the year ended
December 31, 2013, the Company recognized compensation costs of $101,157 based on the
fair value of options that vested. |
|
· |
In
November 2013, pursuant to separation agreement with an Officer of the Company, the Company
cancelled unvested option to purchase 7,040,000 shares of common stock at $0.25 and modified
the vesting period of unvested option to purchase 3,520,000 shares of common stock at
$0.25, both granted during 2011. |
|
· |
During
the year ended December 31, 2013, the Company amortized $403,127 of compensation cost based
on the vesting of the options granted to employees, directors and consultants in prior
years. |
Black-Scholes
Option Pricing
The
Company used the following average assumptions in its calculation using the Black-Scholes Option Pricing model:
| |
|
Years
Ended |
| |
|
2015 |
|
2014 |
|
2013 |
| Expected life (years) |
|
5.0 – 5.5 |
|
|
1.5 – 5.5 |
|
|
1.5 – 5.5 |
|
| Risk free interest
rate |
|
1.56 –
1.72 |
% |
|
0.12 –
1.70 |
% |
|
0.34 –
1.65 |
% |
| Volatility |
|
106 – 121 |
% |
|
123 – 135 |
% |
|
127 – 130 |
% |
| Expected dividend
yield |
|
0 |
% |
|
0 |
% |
|
0 |
% |
The
expected life is based on the expiration date of the related options. The risk-free interest rate is based on the yield
available on U.S. Treasury securities. The Company estimates volatility based on the historical volatility of its common stock.
The expected dividend yield was based on the fact that the Company has not paid dividends to stockholders in the past nor is it
expected to pay any dividends in the foreseeable future.
The
weighted average fair value for options granted in 2015, 2014 and 2013 was $0.39, $0.96 and $0.30, respectively.
Warrants
The
following table summarizes certain information about the Company’s stock purchase warrants.
| |
|
Warrants |
|
|
Weighted
Avg. Exercise
Price
|
|
| Warrants outstanding, January 1, 2013 |
|
|
42,205,507 |
|
|
$ |
0.31 |
|
| Warrants granted |
|
|
150,000 |
|
|
|
0.30 |
|
| Warrants exercised |
|
|
(29,037,389 |
) |
|
|
0.29 |
|
| Warrants cancelled |
|
|
(1,554,152 |
) |
|
|
0.33 |
|
| Warrants outstanding, December 31, 2013 |
|
|
11,763,966 |
|
|
$ |
0.34 |
|
| Warrants granted |
|
|
761,037 |
|
|
|
0.71 |
|
| Warrants exercised |
|
|
(4,690,947 |
) |
|
|
0.30 |
|
| Warrants cancelled |
|
|
(2,141,969 |
) |
|
|
0.46 |
|
| Warrants outstanding, December 31, 2014 |
|
|
5,692,087 |
|
|
$ |
0.36 |
|
| Warrants granted |
|
|
1,796,667 |
|
|
|
0.20 |
|
| Warrants exercised |
|
|
(200,000 |
) |
|
|
0.25 |
|
| Warrants cancelled |
|
|
(2,877,087 |
) |
|
|
0.36 |
|
| Warrants outstanding, December 31, 2015 |
|
|
4,411,667 |
|
|
$ |
0.31 |
|
At
December 31, 2015 the price of the Company’s common stock was $0.19 per share and the aggregate intrinsic value of the warrants
outstanding was $79,200. Future unamortized compensation expense on the unvested outstanding warrants at December 31, 2015 is
approximately $1,867.
| |
|
|
Outstanding Warrants |
|
|
Exercisable Warrants |
|
|
Warrant Exercise
Price Per
Share
|
|
|
Shares |
|
|
Life
(Years)
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Shares |
|
|
Weighted
Average
Exercise
Price
|
|
| $ 0.25 - $ 0.99 |
|
|
|
4,291,667 |
|
|
|
3.2 |
|
|
$ |
0.36 |
|
|
|
4,291,667 |
|
|
$ |
0.34 |
|
| $ 1.00 - $ 1.99 |
|
|
|
120,000 |
|
|
|
0.0 |
|
|
$ |
1.01 |
|
|
|
120,000 |
|
|
$ |
1.01 |
|
| |
|
|
|
4,411,667 |
|
|
|
|
|
|
$ |
0.38 |
|
|
|
4,411,667 |
|
|
$ |
0.35 |
|
2015
|
· |
In
January 2015, warrants to acquire 200,000 shares of common stock were exercised resulting
in gross proceeds of $50,000. |
|
· |
In
May through December 2015, pursuant to terms of convertible notes issued, the Company
granted warrants to purchase 1,796,667 shares with exercise prices of $0.30 per share
and $0.10 per share, vesting immediately upon grant and expiring one year from the date
of grant. See Note 5 for further discussion. |
|
· |
During
the year ended December 31, 2015, the Company amortized $38,524 of compensation cost based
on the vesting of the warrants granted to employees, directors and consultants in prior
years. |
2014
|
· |
In
January and February 2014, warrants to acquire 4,690,947 shares of common stock were
exercised resulting in gross proceeds of $1,407,284. Furthermore, included in the exercise
was issuance of 100,000 shares of common stock valued at $30,000 pursuant to an exercise
of warrants and accounted for as partial settlement of unpaid fees recorded in prior
years. As a result, the aggregate net proceeds received amounted to $1,377,284. |
|
· |
From
January up to October 2014, the Company granted consultants warrants to purchase a total
of 315,000 shares with an average exercise price of $0.84 per share, vesting in six months
up to two years and expiring in two years up to ten years from the date of grant. The
fair value of the warrants upon vesting amounted to $20,950 using the Black-Scholes Option
Pricing model with the following average assumptions: risk-free interest rate of 0.89%;
dividend yield of 0%; volatility of 66%; and an expected life of twenty-nine months.
During the year ended December 31, 2014, the Company recognized an amortized expense
of $20,950 based on the fair value of warrants that vested. |
|
· |
In
May 2014, the Company granted a consultant warrants to purchase 300,000 shares over eighteen
months at the rate of 50,000 shares every three months, with an exercise price of equal
to the closing stock price on the date of vesting, and expiring two years from the date
of grant. The fair value of the warrants vested at December 31, 2014 amounted to $21,000
using the Black-Scholes Option Pricing model with the following average assumptions:
risk-free interest rate of 0.50%; dividend yield of 0%; volatility of 65%; and an expected
life of 18 months. During the year ended December 31, 2014, the Company recognized an
amortized expense of $21,000 based on the fair value of options that vested. |
|
· |
In
October through December 2014, pursuant to terms of convertible notes issued, the Company
granted warrants to purchase 146,037 shares with an exercise price of $0.48 per share,
vesting immediately upon grant and expiring one year from the date of grant. See Note
5 for further discussion. |
|
· |
During
the year ended December 31, 2014, the Company amortized $16,645 of compensation cost based
on the vesting of the warrants granted to employees, directors and consultants in prior
years. |
2013
|
· |
In
March 2013, pursuant to a settlement of debt agreement, the Company granted a consultant
a warrant to purchase 150,000 shares of its common stock with an exercise price of $0.30
per share, vesting immediately and expiring in two years from grant date. The fair value
of the warrant amounted to $129,622 using the Black-Scholes Option Pricing model with
the following average assumptions: risk-free interest rate of 0.26%; dividend yield of
0%; volatility of 132%; and an expected life of two years. |
|
· |
During
the year ended December 31, 2013, warrants to acquire 29,037,389 shares of common stock
were exercised resulting in proceeds of $8,408,718, net of direct costs incurred of $78,521. |
|
· |
During
the year ended December 31, 2013, the Company recorded $52,314 of compensation cost based
on the vesting of the warrants granted to employees, directors and consultants in prior
years. |
|