Annual report pursuant to Section 13 and 15(d)

Stock Options and Warrants

Stock Options and Warrants

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

9.	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, 2022 was 4.8 years. Stock option activity for the period January 1, 2021 to December 31, 2022, was as follows:

Stock options outstanding
	Options			Weighted Avg. Exercise Price
Options outstanding, December 31, 2020		32,480,601		$	0.18
Options granted		800,000			0.03
Options exercised		–			–
Options cancelled		(2,200,000	)		0.30
Options outstanding, December 31, 2021		31,080,601		$	0.17
Options granted		–			–
Options exercised		(250,000	)		0.08
Options cancelled		(4,773,000	)		0.26
Options outstanding, December 31, 2022		26,057,601		$	0.15

The weighted average exercise prices, remaining contractual lives for options granted, exercisable, and expected to vest as of December 31, 2022 were as follows:


	Outstanding Options						Exercisable Options
Option Exercise Price Per Share	Shares		Life (Years)		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
$0.02 - $0.24		22,055,551		5.1	$	0.10		22,055,551	$	0.10
$0.25 - $0.49		3,388,552		3.6		0.36		3,388,552		0.36
$0.50 - $0.99		463,052		1.4		0.85		463,052		0.85
$1.00 - $2.00		150,446		0.6		1.18		150,446		1.18
		26,057,601		4.8	$	0.15		26,057,601	$	0.15

As of December 31, 2022, the market price of the Company’s stock was $0.05 per share. At December 31, 2022 the aggregate intrinsic value of the options outstanding was $36,000. Future unamortized compensation expense on the unvested outstanding options at December 31, 2022 is $0.

Year Ending December 31, 2022

During the year ended December 31, 2022, the Company did not issue options to employees, officers or members of the Board of Directors.

Year Ending December 31, 2021

During the year ended December 31, 2021, the Company issued options to purchase a total of 800,000 shares of common stock to an employee and former officer with a fair value of $32,000 determined using the Black-Scholes Option Pricing model. The options are exercisable at $0.02 to $0.05 per share, vesting immediately or over one month and expire ten years from the date of grant. During the year ended December 31, 2021, the Company recognized compensation costs of $32,000 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:

Assumptions used for option valuation
	Years Ended
	2022		2021
Expected life (years)		–		4.9
Risk free interest rate		–		1.3%
Volatility		–		148%
Expected dividend yield		–		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.

Schedule of warrant activity
	Warrants			Weighted Avg. Exercise Price
Warrants outstanding, December 31, 2020		8,683,677		$	0.11
Warrants granted		19,307,153			0.04
Warrants exercised		–			–
Warrants cancelled		(8,013,681	)		0.10
Warrants outstanding, December 31, 2021		19,977,149		$	0.04
Warrants granted		16,426,657			0.04
Warrants exercised		(14,483,825	)		0.04
Warrants cancelled		(1,605,828	)		0.04
Warrants outstanding, December 31, 2022		20,314,153		$	0.04

At December 31, 2022 the price of the Company’s common stock was $0.05 per share and the aggregate intrinsic value of the warrants outstanding was $235,000. As of December 31, 2022, 20,280,820 warrants were fully vested and 33,333 warrants vest in January 2023.


	Outstanding Warrants						Exercisable Warrants
Option Exercise Price Per Share	Shares		Life (Years)		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
$0.02 - $0.24		20,244,153		1.0	$	0.04		20,210,820	$	0.04
$0.25 - $0.49		–		–		–		–		–
$0.50 - $1.00		70,000		1.3		0.80		70,000		0.80
$1.00 - $2.00		–		–		–		–		–
		20,314,153		1.0	$	0.04		20,280,820	$	0.04

Year Ending December 31, 2022

	·	In September 2022, pursuant to terms of convertible notes issued, the Company granted warrants to purchase 14,409,995 shares of common stock with an exercise price of $0.04 per share, vesting immediately upon grant and expiring one year from the date of grant. See Note 5 for further discussion.

	·	In January through December 2022, pursuant to terms of consulting agreements, the Company granted warrants to purchase 2,016,662 shares of common stock with an exercise price of $0.02 to $0.09 per share, vesting up to one month from the date of grant and expiring two to five years from the date of grant. Total fair value of these options at grant date was approximately $127,000 determined using the Black-Scholes Option Pricing model with the following assumptions: life of 2 to 5 years; risk free interest rate of 0.13% to 4.49%; volatility of 193% to 245%; and dividend yield of 0%. During the year ended December 31, 2021, the Company recognized compensation expense of $127,000 based on the fair value of the warrants that vested.

Year Ending December 31, 2021

	·	In February through December 2021, pursuant to terms of convertible notes issued, the Company granted warrants to purchase 18,907,157 shares of common stock with an exercise price of $0.03 to $0.04 per share, vesting immediately upon grant and expiring one year from the date of grant. See Note 5 for further discussion.

	·	In January through December 2021, 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 $0.05 per share, vesting one month 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 $13,000 determined using the Black-Scholes Option Pricing model with the following assumptions: life of 2 years; risk free interest rate of 0.11% to 0.7%; volatility of 204% to 242%; and dividend yield of 0%. During the year ended December 31, 2021, the Company recognized compensation expense of $13,000 based on the fair value of the warrants that vested.