Employee Options

On September 13, 2013, the Company ratified, confirmed and approved the granting of 2013 stock options in aggregate of 6,000,000 to Kent Emry, newly appointed CEO of the Company under the Company’s 2013 Stock Option Plan. The issued options are exercisable 50% immediately and 50% December 13, 2013 at $0.015 per share for five years.

On October 16, 2013, the Company ratified, confirmed and approved the granting of 2013 stock options in aggregate of 3,000,000 to Brady Granier, newly appointed COO of the Company under the Company’s 2013 Stock Option Plan. The issued options are exercisable immediately at $0.015 per share for five years.

On November 17, 2014, the Company ratified, confirmed and approved the granting of 2014 stock options of 5,000,000 each to Brady Granier, Lourdes Felix and Neil Muller, officers and directors of the Company (in aggregate of 15,000,000 options) under the Company’s 2014 Stock Option Plan. The issued options are exercisable immediately at $0.10 per share for five years.

The following table summarizes the changes in employee options outstanding and the related prices for the shares of the Company’s common stock issued to non-employees of the Company under the 2014 Stock Option Plan: 

Transactions involving stock options issued to employees are summarized as follows:

As described above, on September 13, 2013, the Company granted 6,000,000 options to purchase the Company’s common stock at an exercise price of $0.015 per share for five years to the CEO with 50% immediate vesting and 50% on December 13, 2013. The fair value of options was determined using the Black Scholes Option Pricing Model with the following assumptions: dividend yield $-0-, volatility of 240.38% and risk free rate of 1.39%.

As described above, on October 16, 2013, the Company granted 3,000,000 options to purchase the Company’s common stock at an exercise price of $0.015 per share for five years to the COO with immediate vesting on October 16, 2013. The fair value of options was determined using the Black Scholes Option Pricing Model with the following assumptions: dividend yield $-0-, volatility of 239.10% and risk free rate of 1.45%.

As described above, on November 17, 2014, the Company granted 15,000,000 options to purchase the Company’s common stock at an exercise price of $0.10 per share for five years to officers and directors with immediate vesting on November 17, 2014. The fair value of options was determined using the Black Scholes Option Pricing Model with the following assumptions: dividend yield $-0-, volatility of 209.42% and risk free rate of 0.96%.

During the years ended December 31, 2014 and 2013, the Company issued each year an aggregate of 9,000,000 shares of its common stock in connection with the exercise of employee stock options exercised at $0.015 per share. The above employee options were exercised by offsetting compensation accrued each year totaling $135,000.

The Company recorded $1,355,048 and $307,281 as employee stock compensation expense for the years ended December 31, 2014 and 2013, respectively. 

The intrinsic value of the vested non- employee stock options as of December 31, 2014 was $-0- based on the Company’s stock price of $0.091 per share at December 31, 2014. The intrinsic value of the vested employee stock options as of December 31, 2013 was $945,000 based on the Company’s stock price of $0.12 per share at December 31, 2013.

Non-employee options

In October, 2013, the Company ratified, confirmed and approved the granting of 2013 stock options in aggregate of 250,000 to the Company’s advisory board representing five individuals under the Company’s 2012 Stock Option Plan. The issued options are exercisable 52% immediately and remainder at 10,000 per month (12 months) at $0.015 per share for five years.

On December 4, 2013, the Company ratified, confirmed and approved the granting of 2013 stock options in aggregate of 2,500,000 to consultant organizations of the Company under the Company’s 2013 Stock Option Plan. The issued options are exercisable immediately at $0.015 per share for five years.

On March 10, 2014, the Company ratified, confirmed and approved the granting of 2014 stock options in aggregate of 150,000 to the Company’s advisory board representing five individuals under the Company’s 2012 Stock Option Plan. The issued options are exercisable 52% immediately and remainder at 10,000 per month (12 months) at $0.20 per share for five years.

The following table summarizes the changes in non-employee options outstanding and the related prices for the shares of the Company’s common stock issued to non-employees of the Company under the 2013 Stock Option Plan: 

Transactions involving stock options issued to non-employees are summarized as follows:

On March 10, 2014, the Company ratified, confirmed and approved the granting of 2014 stock options in aggregate of 150,000 to the Company’s advisory board representing five individuals under the Company’s 2012 Stock Option Plan. The issued options are exercisable 52% immediately and remainder at 6,000 per month (12 months) at $0.20 per share for five years.

In November 2014, the Company issued 50,000 shares of its common stock in connection with the exercise of non-employee stock options exercised at $0.10 per share.

During the years ended December 31, 2014, 2,500,000 non-employee stock options were exercised at a weighted average price per share of $0.017. The above non-employee options were exercised by offsetting the amount due to the consultants totaling $37,500.

The assumptions used in the valuation of stock options granted during the years ended December 31, 2014 and 2013 were as follows:

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.

The intrinsic value of the vested non- employee stock options as of December 31, 2014 was $-0- based on the Company’s stock price of $0.091 per share at December 31, 2014.

Warrants:

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

Transactions involving warrants are summarized as follows:

As described in Note 10, above, the Company issued detachable warrants granting the holder the right to acquire an aggregate of 2,430,000 shares of the Company’s common stock at an initial exercise price of $1.00 per share for five years. The warrant contains exercise price adjustments in the event the Company issues additional shares of its common stock or securities convertible into the Company’s common stock at a price per share less than the exercise price in effect or without consideration, then the exercise price upon each issuance shall be adjusted to the price equal to the consideration per share paid for such additional shares of the Company’s common stock. On July 7, 2014, the Company exchanged 1,275,000 warrants with an initial exercise price of $1.00 containing certain reset provisions with 1,275,000 warrants exercisable at $0.25 per share for five years. 

In March 2014, the Company issued 200,000 warrants to purchase the Company’s common stock at an exercise price of $0.25 per share for one year to a Company’s licensee vesting immediately. The fair value of the warrant of $24,557 was determined using the Black Scholes Option Pricing Model with the following assumptions: dividend yield $-0-, volatility of 191.73% and risk free rate of 0.13% and is amortized over the term of the related licensee agreement.