Annual report pursuant to Section 13 and 15(d)

8. Stock Options and Warrants

v3.21.2
8. Stock Options and Warrants
12 Months Ended
Dec. 31, 2020
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]  
Stock Options and Warrants
8. 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

 

Employee options vest according to the terms of the specific grant and expire from 5 to 10 years from date of grant. The weighted average, remaining contractual life of employee and non-employee options outstanding at December 31, 2020 was 5.5 years. Stock option activity for the period January 1, 2019 to December 31, 2020, was as follows:

 

    Options    

Weighted Avg.

Exercise Price

 
Options outstanding, December 31, 2018     35,301,300     $ 0.22  
Options granted     4,987,500       0.08  
Options exercised     (538,197 )     0.13  
Options cancelled            
Options outstanding, December 31, 2019     39,750,603     $ 0.20  
Options granted     3,599,998       0.12  
Options exercised     (60,000 )     0.05  
Options cancelled     (10,810,000 )     0.25  
Options outstanding, December 31, 2020     32,480,601     $ 0.18  

 

The weighted average exercise prices, remaining contractual lives for options granted, exercisable, and expected to vest as of December 31, 2020 were as follows:

 

    Outstanding Options     Exercisable Options  

Option

Exercise Price

Per Share

  Shares     Life
(Years)
    Weighted Average Exercise Price     Shares     Weighted Average Exercise Price  
$ 0.05 - $ 0.24     21,505,551       7.0     $ 0.10       21,405,551     $ 0.10  
$ 0.25 - $ 0.49     10,353,552       2.5       0.30       10,353,552       0.30  
$ 0.50 - $ 0.99     471,052       3.3       0.85       471,052       0.85  
$ 1.00 - $ 2.00     150,446       2.6       1.18       150,446       1.18  
      32,480,601       5.5     $ 0.18       32,380,601     $ 0.18  

 

As of December 31, 2020, the market price of the Company’s stock was $0.02 per share. At December 31, 2020 the aggregate intrinsic value of the options outstanding was $0. Future unamortized compensation expense on the unvested outstanding options at December 31, 2020 is approximately $1,000.

 

Year Ending December 31, 2020

 

   

In January through December 31, 2020, the Company issued options to purchase a total of 3,599,998 shares of common stock to employees, officers and members of the Board of Directors with a fair value of $373,000 using the Black-Scholes Option Pricing model. The options are exercisable at $0.02 to $0.15 per share, vesting over 3 to 12 months and expiring ten years from the date of grant.

 

During the year ended December 31, 2020, the Company recognized compensation costs of $361,000 based on options that vested.

 

Year Ending December 31, 2019

 

   

In January 2019, the Company issued options to purchase a total of 4,987,500 shares of common stock to employees, officers and members of the Board of Directors with a fair value of $359,000 using the Black-Scholes Option Pricing model. The options are exercisable at $0.08 to $0.12 per share, vesting over 3 to 12 months and expiring ten years from the date of grant.

 

During the year ended December 31, 2019, the Company recognized compensation costs of $359,000 based on options that vested.

 

Black-Scholes Option Pricing

 

The Company used the following average assumptions in its calculation using the Black-Scholes Option Pricing model:

 

    Years Ended  
    2020     2019  
Expected life (years)     5.5       5.0  
Risk free interest rate     1.7%       2.4%  
Volatility     138%       123%  
Expected dividend yield     0%       0%  

 

The assumptions used in the Black Scholes models referred to above are based upon the following data: (1) the contractual life of the underlying non-employee options is the expected life. The expected life of the employee option is estimated by considering the contractual term of the option, the vesting period of the option and the employees’ expected exercise behavior. (2) The expected stock price volatility was based upon the Company’s historical stock price over the expected term of the option. (3) The risk-free interest rate is based on published U.S. Treasury Department interest rates for the expected terms of the underlying options. (4) The expected dividend yield was based on the fact that the Company has not paid dividends to common shareholders in the past and does not expect to pay dividends to common shareholders in the future.

 

Warrants

 

The following table summarizes certain information about the Company’s stock purchase warrants.

 

    Warrants    

Weighted Avg.

Exercise Price

 
Warrants outstanding, December 31, 2018     21,055,355     $ 0.09  
Warrants granted     11,180,084       0.07  
Warrants exercised     (10,629,493 )     0.05  
Warrants cancelled     (8,540,862 )     0.07  
Warrants outstanding, December 31, 2019     13,065,084     $ 0.11  
Warrants granted     6,117,013       0.03  
Warrants exercised     (1,155,000 )     0.05  
Warrants cancelled     (9,343,420 )     0.07  
Warrants outstanding, December 31, 2020     8,683,677     $ 0.11  

 

At December 31, 2020 the price of the Company’s common stock was $0.02 per share and the aggregate intrinsic value of the warrants outstanding was $0. As of December 31, 2020, 8,650,344 warrants were fully vested and 33,333 warrants vest in January 2021.

 

    Outstanding Warrants     Exercisable Warrants  
Warrant
Exercise Price
Per Share
  Shares     Life
(Years)
    Weighted Average Exercise Price     Shares     Weighted Average Exercise Price  
$ 0.05 - $ 0.24     6,613,677       0.8     $ 0.04       6,580,344     $ 0.04  
$ 0.25 - $ 0.49     2,000,000       0.8       0.30       2,000,000       0.30  
$ 0.50 - $ 1.00     70,000       3.3       0.80       70,000       0.80  
      8,683,677       0.8     $ 0.11       8,650,344     $ 0.11  

 

Year Ending December 31, 2020

  

  · In March through December 2020, pursuant to terms of convertible notes issued, the Company granted warrants to purchase 5,717,017 shares of common stock with an exercise price of $0.03 to $0.035 per share, vesting immediately upon grant and expiring one year from the date of grant. See Note 5 for further discussion.

 

  · In April through December 2020, pursuant to terms of a consulting agreement, the Company granted warrants to purchase 399,996 shares of common stock with an exercise price of $0.02 to $0.08 per share, vesting 1 to 3 months from the date of grant and expiring two years from the date of grant. Total fair value of these options at grant date was approximately $16,000 using the Black-Scholes Option Pricing model with the following assumptions: life of 2 years; risk free interest rate of 0.11% to 0.19%; volatility of 188% to 200%; and dividend yield of 0%. During the year ended December 31, 2020, the Company recognized compensation expense of $16,000 based on the fair value of the warrants that vested.

 

Year Ending December 31, 2019

  

  · In February through December 2019, pursuant to terms of convertible notes issued, the Company granted warrants to purchase 10,913,420 shares of common stock with an exercise price of $0.05 to $0.15 per share, vesting immediately upon grant and expiring one year from the date of grant. See Note 5 for further discussion.

 

  · In May through December 2019, pursuant to terms of a consulting agreement, the Company granted warrants to purchase 266,664 shares of common stock with an exercise price of $0.11 to $0.24 per share, vesting 1 to 3 months from the date of grant and expiring two years from the date of grant. Total fair value of these options at grant date was approximately $27,000 using the Black-Scholes Option Pricing model with the following assumptions: life of 2 years; risk free interest rate of 1.56% to 1.63%; volatility of 148% to 163%; and dividend yield of 0%. During the year ended December 31, 2019, the Company recognized compensation expense of $24,000 based on the fair value of the warrants that vested.