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, 2017 was 5.6 years. Stock option
activity for the period January 1, 2016 to December 31, 2017, was as follows:
|
|
Options |
|
|
Weighted
Avg.
Exercise
Price
|
|
Options outstanding, January
1, 2016 |
|
|
21,535,148 |
|
|
$ |
0.20 |
|
Options granted |
|
|
2,250,527 |
|
|
|
0.46 |
|
Options exercised |
|
|
– |
|
|
|
– |
|
Options
cancelled |
|
|
(311,419 |
) |
|
|
0.72 |
|
Options outstanding, December 31, 2016 |
|
|
23,474,256 |
|
|
$ |
0.30 |
|
Options granted |
|
|
12,561,852 |
|
|
|
0.12 |
|
Options exercised |
|
|
(449,754 |
) |
|
|
0.05 |
|
Options
cancelled |
|
|
(188,679 |
) |
|
|
0.53 |
|
Options outstanding,
December 31, 2017 |
|
|
35,397,675 |
|
|
$ |
0.23 |
|
The
weighted average exercise prices, remaining contractual lives for options granted, exercisable, and expected to vest as of December 31,
2017 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
- $ 0.99 |
|
|
|
35,247,229 |
|
|
|
5.6 |
|
|
$ |
0.22 |
|
|
|
31,147,229 |
|
|
$ |
0.22 |
|
|
$
1.00 - $ 1.99 |
|
|
|
150,446 |
|
|
|
5.6 |
|
|
$ |
1.18 |
|
|
|
150,446 |
|
|
$ |
1.18 |
|
|
|
|
|
|
35,397,675 |
|
|
|
|
|
|
$ |
0.23 |
|
|
|
31,297,675 |
|
|
$ |
0.22 |
|
As
of December 31, 2017, the market price of the Company’s stock was $0.19 per share. At December 31, 2017 the aggregate intrinsic
value of the options outstanding was $1,174,000. Future unamortized compensation expense on the unvested outstanding options at
December 31, 2017 is approximately $123,000.
Year
Ending December 31, 2017
|
|
From January through
July 2017, the Company issued options to purchase a total of 12,561,852 shares of common stock to employees, officers and
members of the Board of Directors with a fair value of $647,000 using the Black-Scholes Option Pricing model. The options
are exercisable from $0.07 up to $0.40 per share, vesting within one to three years and expiring in ten years from the date
of grant. During the year ended December 31, 2017, the Company recognized compensation costs of $761,000 based on options
that vested. |
|
|
During the year ended
December 31, 2017, the Company amortized $36,000 of compensation cost based on the vesting of the options granted to employees
and directors in prior years. |
Year
Ending December 31, 2016
|
|
From January through
May 2016, the Company issued options to purchase a total of 2,250,527 shares of common stock to employees, officers and members
of the Board of Directors with a fair value of $357,000 using the Black-Scholes Option Pricing model. The options are exercisable
from $0.18 up to $0.19 per share, vesting within one or two years and expiring in ten years from the date of grant. During
the year ended December 31, 2016, the Company recognized compensation costs of $316,000 based on options that vested. |
|
|
During the year ended
December 31, 2016, the Company amortized $34,000 of compensation cost based on the vesting of the options granted to employees
and directors 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 |
|
|
|
2017 |
|
|
|
2016 |
|
Expected
life (years) |
|
|
5 –
6 |
|
|
|
|
5.5 |
|
Risk free interest rate |
|
|
1.72 – 1.94% |
|
|
|
|
1.23 – 1.72% |
|
Volatility |
|
|
114 – 124% |
|
|
|
|
119 – 121% |
|
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, the employees’ expected exercise behavior and the
post-vesting employee turnover rate. (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, January
1, 2016 |
|
|
4,411,667 |
|
|
$ |
0.31 |
|
Warrants granted |
|
|
8,735,225 |
|
|
|
0.11 |
|
Warrants exercised |
|
|
– |
|
|
|
– |
|
Warrants
cancelled |
|
|
(1,700,000 |
) |
|
|
0.30 |
|
Warrants outstanding, December 31, 2016 |
|
|
11,446,892 |
|
|
$ |
0.15 |
|
Warrants granted |
|
|
16,160,770 |
|
|
|
0.05 |
|
Warrants exercised |
|
|
(4,414,000 |
) |
|
|
0.08 |
|
Warrants
cancelled |
|
|
(5,571,225 |
) |
|
|
0.10 |
|
Warrants outstanding,
December 31, 2017 |
|
|
17,622,437 |
|
|
$ |
0.09 |
|
At
December 31, 2017 the price of the Company’s common stock was $0.19 per share and the aggregate intrinsic value of the warrants
outstanding was $0. Future unamortized compensation expense on the unvested outstanding warrants at December 31, 2017 is approximately
$2,041,000.
|
|
|
|
|
Outstanding
Warrants |
|
|
|
Exercisable
Warrants |
|
|
Warrant
Exercise
Price
Per
Share
|
|
|
|
Shares |
|
|
|
Life
(Years)
|
|
|
|
Weighted
Average
Exercise
Price
|
|
|
|
Shares |
|
|
|
Weighted
Average
Exercise
Price
|
|
|
$
0.05 - $ 0.99 |
|
|
|
17,622,437 |
|
|
|
0.9 |
|
|
$ |
0.09 |
|
|
|
17,572,437 |
|
|
$ |
0.09 |
|
|
|
|
|
|
17,622,437 |
|
|
|
|
|
|
$ |
0.09 |
|
|
|
17,572,437 |
|
|
$ |
0.09 |
|
Year
Ending December 31, 2017
|
|
In January through
May 2017, pursuant to terms of convertible notes issued, the Company granted warrants to purchase 16,160,770 shares of common
stock with an exercise price of $0.05 per share, vesting immediately upon grant and expiring one year from the date of grant.
See Note 5 for further discussion. |
|
|
Effective May 2017,
the Company amended the terms of a warrant issued in 2015, extending the expiration date of the warrant by twenty-four months
with no changes to the other terms of the original grant. As a result, the Company recorded the incremental change in the
fair value of this warrant before and after the date of the amendment of $90,000, computed using the Black-Scholes Option
Pricing model with the following assumptions: life of 1.5 years; exercise price of $0.30 per share; stock price of $0.24 per
share, average risk-free interest rate of 1.70%; average volatility of 140% and dividend yield of 0%. During the year ended
December 31, 2017, the Company recognized an expense of $90,000 based on the fair value of the warrant as amended. |
|
|
During the year ended
December 31, 2017, the Company amortized $1,000 of compensation cost based on the vesting of the warrants granted consultants
in prior years. |
Year
Ending December 31, 2016
|
|
In January through
August 2016, pursuant to terms of convertible notes issued, the Company granted warrants to purchase 7,935,225 shares of common
stock with an exercise price of $0.10 per share, vesting immediately upon grant and expiring one year from the date of grant.
See Note 5 for further discussion. |
|
|
In February through
July 2016 the Company granted warrants to purchase 800,000 shares of common stock to consultants. The options are exercisable
starting at $0.12 per share to $0.18 per share, 600,000 shares vested immediately and 200,000 shares over vest two years,
and expire in one to three years from the date granted. The fair value of these warrants was computed using the Black-Scholes
Option Pricing model with the following assumptions: life of 1 year through 10 years; average stock price of $0.16 per share,
average risk-free interest rate of 0.82%; average volatility of 110% and dividend yield of 0%. During the year ended December
31, 2016, the Company recognized an expense of $59,000 based on the fair value of warrants that vested. |
|
|
In May 2016, the
Company amended the terms of a warrant issued in 2015, extending the expiration date of the warrant by twelve months with
no changes to the other terms of the original grant. As a result, the Company recorded the incremental change in the fair
value of this warrant before and after the date of the amendment of $32,000, computed using the Black-Scholes Option Pricing
model with the following assumptions: life of 1 year; stock price of $0.17 per share, average risk free interest rate of 0.81%;
average volatility of 97% and dividend yield of 0%. During the year ended December 31, 2016, the Company recognized an expense
of $32,000 based on the fair value of the warrant as amended. |
|
|
During the year ended
December 31, 2016, the Company amortized $1,000 of compensation cost based on the vesting of the warrants granted to employees,
directors and consultants in prior years. |
|