Shareholders' Equity, Mandatorily Redeemable Convertible Preferred Stock, Options and Warrants

12 Months Ended

Dec. 31, 2016

Equity [Abstract]

Shareholders' Equity, Mandatorily Redeemable Convertible Preferred Stock, Options and Warrants

NOTE 9 – SHAREHOLDERS’ EQUITY, REDEEMABLE CONVERTIBLE PREFERRED STOCK, OPTIONS AND WARRANTS

Warrants

As disclosed in Note 7, on July 27, 2012, the Company entered into a securities purchase agreement with certain institutional and private investors. Each investor received a common stock purchase warrant to purchase such number of shares of the Company’s common stock equal to twenty-five percent (25%) of the number of shares of common stock that the note purchased by such investor may be convertible into on the closing date. The total possible number of shares of common stock to be issued under the warrants is 4,502,520. The warrants are immediately exercisable at a price of $0.30 per share and have a term of five years.

In December 2013, we entered into a promissory note agreement with our chairman of the Board and one of our major shareholders pursuant to which we borrowed $500,000. The $500,000 note bears interest at 6% and was originally due June 30, 2014. At any time, the lenders may settle any or all of the principal and accrued interest with shares of the Company’s common stock. In connection with the note, each of the two lenders was issued 5,000,000 warrants to purchase shares of the Company’s common stock at a purchase price of $0.06 per share. In June 2014, we renegotiated the terms of this promissory note. Pursuant to the modification, the maturity date was extended to December 31, 2017, and each Lender was granted an additional 7,500,000 warrants to purchase shares of the Company’s common stock at $0.06 per share. The warrants were immediately exercisable.

The following table summarizes warrant activity for the years ended December 31, 2016 and 2015:

Warrants	Outstanding Shares	Weighted Average Exercise Price
Outstanding at December 31, 2014	42,257,951	$	0.18
Granted	-		-
Exercised	-		-
Forfeited	-		-
Outstanding at December 31, 2015	42,257,951		0.18
Granted	-		-
Exercised	-		-
Forfeited	(14,838,779)		0.38
Outstanding at December 31, 2016	27,419,172	$	0.08

In July 2015, the Board determined that it was in the best interests of the Company to extend the expiration dates of all outstanding Class H and Class I Warrants to January 31, 2016. Therefore, 1,913,892 Class H warrants, which previously carried an expiration date of August 24, 2015, and 12,924,887 Class I warrants, which previously carried an expiration date of October 24, 2015, were amended to extend the expiration date to January 31, 2016. The Company recorded approximately $884 of additional stock-based compensation expense with respect to this extension. As of January 31, 2016, none of the Class H or Class I Warrants had been exercised and therefore expired.

Mandatorily Redeemable Convertible Preferred Stock

The Company is authorized to issue up to 5,000,000 shares of preferred stock, par value $0.01 per share. The Board is authorized to set the distinguishing characteristics of each series prior to issuance, including the granting of limited or full voting rights, rights to the payment of dividends and amounts payable in event of liquidation, dissolution or winding up of the Company.

At December 31, 2016, there were 850 shares of the Series B Convertible Redeemable Preferred Stock (the “Series B Preferred Stock”) outstanding with a mandatory redemption date of May 2022 at $1,000 per share, or $850,000 in aggregate redemption value. The Series B Preferred Stock is convertible into common stock at a conversion price of $2.00 per share. These preferred shares carry no dividend preferences. Due to the mandatory redemption provision, the Series B Preferred Stock has been classified as a liability in the accompanying consolidated balance sheets.

As described in further detail in Note 15 below, on February 17, 2017, the Company issued 3,433 shares of Series C Preferred Stock. The Series C Preferred Stock has a mandatory redemption date of February 17, 2022 at $1,000 per share of Series C Preferred Stock. The Series C Preferred Stock is convertible into common stock at a conversion price of $0.10 per share. The Series C Preferred Stock pay dividends annually at a rate of 6%.

Employee Stock Purchase Plan

In September 2004, the Company’s Board approved an employee stock purchase plan for an aggregate of up to 2,000,000 shares of the Company’s common stock. The plan allows employees to deduct up to 15% of their salary or wages each pay period to be used for the purchase of common stock at a discounted rate. The common shares will be purchased at the end of each three-month offering period or other period as determined by the Board. The plan is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code.

During 2016 and 2015, the Company issued 57,654 and 115,102 shares of common stock to employees for proceeds of $3,993 and $3,743, respectively, in accordance with the employee stock purchase plan.

2015 Incentive Plan

In April 2015, the Board approved the International Isotopes Inc. 2015 Incentive Plan (the “2015 Plan”,) which was subsequently approved by the Company’s shareholders in July 2015. The 2015 Plan provides for the grant of incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and units, and other stock or cash-based awards. The 2015 Plan amends and restates the Company’s Amended and Restated 2006 Equity Incentive Plan (the “2006 Plan”).

The 2015 Plan authorizes the issuance of up to 60,000,000 shares of common stock, plus 11,089,967 shares authorized, but not issued under the 2006 Plan. Unless earlier terminated, the 2015 Plan will terminate on July 13, 2025. At December 31, 2016, there were 23,552,680 shares available for issuance under the 2015 Plan.

Non-Vested Stock Grants

Pursuant to an employment agreement with the Company’s Chief Executive Officer, the Company issued 280,000 in fully vested shares of common stock in February 2016. The number of shares awarded was based on a $28,000 stock award using a price of $0.10 per share. The agreement states that the number of shares issued was based on the average closing price of common stock for the 20 trading days prior to the issue date but not less than $0.10 per share. Compensation expense recorded pursuant to this stock grant was $25,200, which was determined by multiplying the number of shares awarded by the closing price of common stock on February 29, 2016, which was $0.09 per share. The Company withheld 112,140 shares to satisfy the employee’s payroll tax liabilities in connection with this issuance. The net shares issued on February 29, 2016 totaled 167,860 shares.

Pursuant to the employment agreement noted above, the Company issued 280,000 in fully vested shares of common stock in February 2015. The number of shares issued was based on a price of $0.10 per share. The Company withheld 112,140 shares to satisfy payroll tax liabilities in connection with this issuance. The net shares issued on February 27, 2015 totaled 167,860 shares.

Stock Options

A summary of the stock options issued under the Company’s equity plans is as follows:

Options	Outstanding Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Intrinsic Value
Outstanding at December 31, 2014	27,950,000	$	0.04
Granted	-		-
Exercised	-		-
Forfeited	-		-
Outstanding at December 31, 2015	27,950,000		0.04
Granted	-		-
Exercised	(4,500,000)		0.04		$	202,500
Forfeited	(133,333)		-0.04
Outstanding at December 31, 2016	23,316,667	$	0.06	5.4	$	1,883,667
Exercisable at December 31, 2016	23,129,167	$	0.05	5.4	$	1,874,292

The total intrinsic value of stock options outstanding at December 31, 2016 was $1,883,667. The intrinsic value for stock options outstanding is calculated as the amount by which the quoted price of $0.12 of our common stock as of the end of 2016 exceeds the exercise price of the options.

The Company recognized $49,677 and $138,115 of compensation expense related to these options for the years ended December 31, 2016 and 2015, respectively. At December 31, 2016, the remaining compensation expense was $33 and will be recognized over .049 years.

In June 2016, 500,000 qualified stock options, with an intrinsic value of $22,500, were exercised under a cashless exercise. The Company withheld 218,750 shares to satisfy the exercise price and issued 281,250 shares of common stock.

In August 2016, 4,000,000 non-qualified stock options, with an intrinsic value of $180.000, were exercised under a cashless exercise. The Company withheld 1,750,000 shares to satisfy the exercise price and issued 2,250,000 shares of common stock.

All options exercised were issued under a qualified plan and accordingly, there is no income tax effect in the accompanying financial statements.