| 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, 2018 was 5.2 years. Stock option activity for
the period January 1, 2017 to December 31, 2018, was as follows:
| |
|
Options |
|
|
Weighted Avg. Exercise Price
|
|
| Options outstanding, January 1, 2017 |
|
|
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 |
|
| Options granted |
|
|
2,083,335 |
|
|
|
0.18 |
|
| Options exercised |
|
|
(179,710 |
) |
|
|
0.07 |
|
| Options cancelled |
|
|
(2,000,000 |
) |
|
|
0.28 |
|
| Options outstanding, December 31, 2018 |
|
|
35,301,300 |
|
|
|
0.22 |
|
The weighted average
exercise prices, remaining contractual lives for options granted, exercisable, and expected to vest as of December 31, 2018
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 |
|
|
|
13,766,250 |
|
|
|
8.1 |
|
|
$ |
0.10 |
|
|
|
13,466,250 |
|
|
$ |
0.10 |
|
| |
$ 0.25 - $ 0.49 |
|
|
|
20,913,552 |
|
|
|
3.3 |
|
|
|
0.27 |
|
|
|
18,913,552 |
|
|
|
0.27 |
|
| |
$ 0.50 - $ 0.99 |
|
|
|
471,052 |
|
|
|
5.3 |
|
|
|
0.85 |
|
|
|
471,052 |
|
|
|
0.85 |
|
| |
$ 1.00 - $ 2.00 |
|
|
|
150,446 |
|
|
|
4.6 |
|
|
|
1.18 |
|
|
|
150,446 |
|
|
|
1.18 |
|
| |
|
|
|
|
35,301,300 |
|
|
|
5.2 |
|
|
$ |
0.22 |
|
|
|
33,001,300 |
|
|
$ |
0.21 |
|
As of December 31,
2018, the market price of the Company’s stock was $0.09 per share. At December 31, 2018 the aggregate intrinsic value of
the options outstanding was $286,000. Future unamortized compensation expense on the unvested outstanding options at December 31,
2018 is approximately $19,000.
Year Ending December
31, 2018
| |
· |
In January 2018, the Company issued options to purchase a total of 2,083,335 shares of common stock to employees, officers and members of the Board of Directors with a fair value of $313,000 using the Black-Scholes Option Pricing model. The options are exercisable from $0.18 per share, vesting within year and expiring in ten years from the date of grant. During the year ended December 31, 2018, the Company recognized compensation costs of $313,000 based on options that vested. |
| |
· |
During the year ended December 31, 2018, the Company amortized $121,000 of compensation cost based on the vesting of the options granted to employees and directors in prior years. |
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. |
Black-Scholes
Option Pricing
The Company used the
following average assumptions in its calculation using the Black-Scholes Option Pricing model:
| |
|
Years Ended |
|
| |
|
2018 |
|
|
2017 |
|
| Expected life (years) |
|
|
5.5 |
|
|
|
5 – 6 |
|
| Risk free interest rate |
|
|
1.70% |
|
|
|
1.72 – 1.94% |
|
| Volatility |
|
|
118% |
|
|
|
114 – 124% |
|
| 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, 2017 |
|
|
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 |
|
| Warrants granted |
|
|
18,238,688 |
|
|
|
0.05 |
|
| Warrants exercised |
|
|
(12,517,773 |
) |
|
|
0.05 |
|
| Warrants cancelled |
|
|
(2,287,997 |
) |
|
|
0.05 |
|
| Warrants outstanding, December 31, 2018 |
|
|
21,055,355 |
|
|
|
0.09 |
|
At December 31, 2018
the price of the Company’s common stock was $0.09 per share and the aggregate intrinsic value of the warrants outstanding
was $661,000. As of December 21, 2018, all warrants were fully vested.
| |
|
|
|
|
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 |
|
|
|
18,343,688
|
|
|
|
0.9 |
|
|
$ |
0.06 |
|
|
|
18,343,688 |
|
|
$ |
0.06 |
|
| |
$ 0.25 - $ 0.49 |
|
|
|
2,641,667 |
|
|
|
2.2 |
|
|
|
0.30 |
|
|
|
2,641,667 |
|
|
|
0.30 |
|
| |
$ 0.50 - $ 1.00 |
|
|
|
70,000 |
|
|
|
5.3 |
|
|
|
0.80 |
|
|
|
70,000 |
|
|
|
0.80 |
|
| |
|
|
|
|
21,055,355 |
|
|
|
1.1 |
|
|
$ |
0.09 |
|
|
|
21,055,355 |
|
|
$ |
0.09 |
|
Year Ending December 31, 2018
| |
· |
In February through December 2018, pursuant to terms of convertible notes issued, the Company granted warrants to purchase 18,238,688 shares of common stock with an exercise price of $0.05 to $0.08 per share, vesting immediately upon grant and expiring one year from the date of grant. See Note 5 for further discussion. |
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. |
|