Annual report pursuant to Section 13 and 15(d)

STOCK OPTIONS AND WARRANTS

v3.7.0.1
STOCK OPTIONS AND WARRANTS
12 Months Ended
Dec. 31, 2016
Notes to Financial Statements  
Note 13 - STOCK OPTIONS AND WARRANTS

Options

 

Option valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived from using the Company's historical stock prices. The Company accounts for the expected life of options based on the contractual life of options for non-employees. For employees, the Company accounts for the expected life of options in accordance with the "simplified" method, which is used for "plain-vanilla" options, as defined in the accounting standards codification.

   

The risk-free interest rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the options.

 

The Company estimated forfeitures related to option grants at a weighted average annual rate of 0% per year, as the Company does not yet have adequate historical data, for options granted during the year ended December 31, 2016 and 2015.

 

The following assumptions were used in determining the fair value of employee and vesting non-employee options during the year ended December 31, 2016 and 2015:

 

    2016     2015  
Risk-free interest rate     1.13 %   0.089% to 1.73 %
Dividend yield     0 %     0 %
Stock price volatility     163.82 %   145.90% to 226.04 %
Expected life   5.75 years     3.95 to 5.00 years  
Weighted average grant date fair value   $ 0.019       .040  

 

The risk-free interest rate is based on the yield of Daily U.S. Treasury Yield Curve Rates with terms equal to the expected term of the options as of the grant date.

 

On July 20, 2015, the Company granted 3,500,000 options to a consultant. The granted options are exercisable immediately at $0.045 per share for five years. The fair value of options was determined using the Black Scholes Option Pricing Model with the following assumptions: dividend yield $-0-, volatility of 151.39% and risk free rate of 1.72%. The determined fair value of $142,193 was charged to 2015 operations.

 

On October 12, 2015, the Company granted 1,000,000 options to a consultant. The granted options are exercisable immediately at $0.15 per share for five years. The fair value of options was determined using the Black Scholes Option Pricing Model with the following assumptions: dividend yield $-0-, volatility of 145.90% and risk free rate of 1.41%. The determined fair value of $37,088 was charged to 2015 operations.

 

On June 17, 2016, the Company awarded options to purchase an aggregate of 33,000,000 shares of common stock to key officers of the Company. These options vest monthly over 24 months and have a term of 10 years. The options have an exercise price of $0.0201 per share. The options had an aggregate grant date fair value of $628,283.

 

On June 17, 2016, the Company extended the term of previously granted options in aggregate of 13,500,000 initially expiring from November 2019 to July 2020 by five years to November 2024 to July 2025. The change in fair value of $53,858 was determined using the Black Scholes option model and charged to current to operations during the year ended December 31, 2016.

   

The following table summarizes the stock option activity for the two years ended December 31, 2016:

 

    Shares    

Weighted-Average

Exercise Price

   

Weighted-Average

Remaining

Contractual Term

   

Aggregate

Intrinsic Value

 
Outstanding at January 1, 2015     15,350,000       0.10       3.75        
Grants     4,500,000       0.07       10.0        
Exercised     -                        
Canceled     (5,000,000 )     (0.10 )              
Outstanding at December 31, 2015     14,850,000     $ 0.09       4.4     $ -  
Grants     33,000,000       0.02       10.0       -  
Exercised     -                          
Expired     -               -       -  
Outstanding at December 31, 2016     47,850,000     $ 0.04       8.9     $ 326,700  
Exercisable at December 31, 2016     23,100,000     $ 0.07       8.3     $ 81,675  

 

The aggregate intrinsic value in the preceding tables represents the total pretax intrinsic value, based on options with an exercise price less than the Company's stock price of $0.03 as of December 31, 2016, which would have been received by the option holders had those option holders exercised their options as of that date.

 

The following table presents information related to stock options at December 31, 2016:

 

Options Outstanding     Options Exercisable  
          Weighted        
          Average     Exercisable  
Exercise   Number of     Remaining Life     Number of  
Price   Options     In Years     Options  
                   
$ 0.01-0.025     33,000,000       9.46       8,250,000  
  0.0251-0.05     3,500,000       8.56       3,500,000  
  0.051 and up     11,350,000       7.34       11,350,000  
        47,850,000       8.89       23,100,000  

 

The stock-based compensation expense related to option grants was $183,249 and $180,536 during the year end December 31, 2016 and 2015, respectively.

 

As of December 31, 2016, stock-based compensation related to options of $445,034 remains unamortized and is expected to be amortized over the weighted average remaining period of 1.50 years.

   

Warrants:

 

The following table summarizes the changes in warrants outstanding and the related prices for the shares of the Company's common stock:

 

Warrants Outstanding     Warrants Exercisable  
Exercise
Prices
    Number
Outstanding
    Weighted
Average
Remaining
Contractual
Life (Years)
    Weighted
Average
Exercise
Price
    Number
Exercisable
    Weighted
Average
Remaining
Contractual
Life (Years)
 
                                 
$ 0.25       1,475,000       1.90     $ 0.25       1,475,000       2.44  
  1.00       1,155,000       1.49       1.00       1,155,000       2.01  
$ 0.58       2,630,000       1.75     $ 0.58       2,630,000       2.25  

 

The following table summarizes the warrant activity for the two years ended December 31, 2016:

 

    Number of
Shares
    Weighted
Average
Exercise
Price Per
Share
 
Outstanding at January 1, 2015     2,630,000     $ 0.58  
Issued     -          
Exercised     -          
Canceled     -          
Outstanding at December 31, 2015     2,630,000     $ 0.58  
Issued     -       -  
Exercised     -       -  
Canceled     -       -  
Outstanding at September 30, 2016     2,630,000     $ 0.58