STOCK OPTIONS AND WARRANTS
|9 Months Ended|
Sep. 30, 2016
|Notes to Financial Statements|
|Note 13 - STOCK OPTIONS AND WARRANTS||
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.
In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company's forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the number of vested options as a percentage of total options outstanding. If the Company's actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what the Company has recorded in the current period.
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 nine months ended September 30, 2016 and 2015.
The following assumptions were used in determining the fair value of employee and vesting non-employee options during the nine months ended September 30, 2016:
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 nine months ended September 30, 2016.
The following assumptions were used in determining the change in fair value of extended options during the nine months ended September 30, 2016:
The following table summarizes the stock option activity for the nine months ended September 30, 2016:
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 $0.039 as of September 30, 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 September 30, 2016:
The stock-based compensation expense related to option grants was $78,535 and $104,713 during the three and nine months ended September 30, 2016, and $142,193 and $143,448 during the three and nine months ended September 30, 2015.
As of September 30, 2016, stock-based compensation related to options of $523,568 remains unamortized and is expected to be amortized over the weighted average remaining period of 1.67 years.
The following table summarizes the changes in warrants outstanding and the related prices for the shares of the Company's common stock: