STOCK OPTIONS, RESTRICTED STOCK AND WARRANTS

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

STOCK OPTIONS, RESTRICTED STOCK AND WARRANTS

NOTE 7 – STOCK OPTIONS, RESTRICTED STOCK AND WARRANTS

On December 17, 2003, the Company adopted the 2003 Stock Option Plan (the “2003 Plan”). Under the 2003 Plan, the Company is authorized to grant options to purchase up to 18,000,000 shares of common stock to the Company’s employees, officers, directors, consultants, and other agents and advisors.

During 2013, the Company adopted a new incentive compensation plan (the “2013 Plan”). Under the 2013 Plan, the Company is authorized to grant awards of stock options, restricted stock, restricted stock units and other stock-based awards of up to an aggregate of 20,000,000 shares of common stock.  The 2013 Plan is intended to permit certain stock options granted to employees under the 2013 Plan to qualify as Incentive Stock Options.  All options granted under the 2013 Plan, which are not intended to qualify as Incentive Stock Options are deemed to be Non-Qualified Stock Options.  

On November 14, 2017, the Executive Committee of the Company’s Board of Directors adopted the 2017 Equity Incentive Plan (the “Plan”) which covers the potential issuance of 13,000,000 shares of common stock. The Plan provides that directors, officers, employees, and consultants of the Company will be eligible to receive equity incentives under the Plan at the discretion of the Board or the Board’s Compensation Committee. The Compensation Committee may adopt rules and regulations to carry out the terms of the Plan. The Plan terminates on November 14, 2027 unless sooner terminated.

The 2017 Plan is administered by the Compensation Committee which determines the persons to whom awards will be granted, the number of awards to be granted and the specific terms of each grant, including the vesting thereof, subject to the provisions of the plan.

 
In connection with Incentive Stock Options, the exercise price of each option may not be less than 100% of the fair market value of the common stock on the date of the grant (or 110% of the fair market value in the case of a grantee holding more than 10% of the outstanding stock of the Company). The aggregate fair market value (determined at the time of the grant) of stock for which an employee may exercise Incentive Stock Options under all plans of the Company shall not exceed $1,000,000 per calendar year. If any employee shall have the right to exercise any options in excess of $100,000 during any calendar year, the options in excess of $100,000 shall be deemed to be Non-Qualified Stock Options, including prices, duration, transferability and limitations on exercise.

The Company issued non-qualified stock options pursuant to contractual agreements with non-employees. Options granted under the agreements are expensed when the related service or product is provided.

Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions. The Company uses the Black-Scholes option pricing model to value its stock option awards. The assumptions used in calculating the fair value represent management’s best estimates and involve inherent uncertainties and judgements.

The following table presents the weighted-average assumptions used to estimate the fair value of the stock options granted during the three months ended March 31, 2020:

Risk Free Interest Rate		1.78	%
Expected Volatility		453.90	%
Expected Life (in years)		5.0
Dividend Yield		0	%
Weighted average estimated fair value of
options during the period	$	0.10

	Options Outstanding
					Weighted -
					Average		Aggregate
					Remaining		Intrinsic
			Weighted-		Contractual		Value
	Number of		Average		Term		(in 000’s)
	Shares		Exercise Price		(in years)		(1)
Balance as of December 31, 2019	17,913,529		$0.12
Granted		4,700,000		0.07
Balance as of March 31, 2020		22,613,529	$	0.11
Exercisable as of March 31, 2020		20,088,529	$	0.11		2.9	$302

(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock for options that were in-the-money at each respective period. 

The following table summarizes the activities for the Company’s unvested stock options for the three months ended March 31, 2020:

	Unvested Options
	Weighted - Average
	Number of Unvested			Grant Date
	Options			Exercise Price
Balance as of December 31, 2019		1,000,000		$	0.20
Granted		4,700,000			0.07
Vested		(3,175,000	)		0.09
Balance as of March 31, 2020		2,525,000		$	0.09

Effective January 2020, the Company awarded its Chief Financial Officer Incentive Stock Options exercisable for 200,000 shares of common stock with an exercise price of $0.0701 vesting quarterly over a one-year period and expiring on January 7, 2025 with a fair value of $13,716.

Effective January 2020, the Company awarded four directors Non-Qualified Stock Options exercisable for 2,000,000 shares in the aggregate, for services rendered to the Company in 2019 with an exercise price of $0.0701 vesting immediately and expiring on January 7, 2025 with a fair value of $137,160.

Effective January 2020, the Company awarded five of its directors Non-Qualified Stock Options exercisable for 2,500,000 shares in the aggregate, for services to be rendered to the Company in 2020 with an exercise price of $0.0701 vesting quarterly over a one-year period and expiring on January 7, 2025 with a fair value of $171,451. 

During the three months ended March 31, 2020 and 2019, the Company expensed $217,605 and $123,711, respectively, with respect to options.

As of March 31, 2020, there was $192,633 unrecognized compensation cost related to outstanding stock options expected to vest over the weighted average of 0.8 years.

The following table summarizes the activities for the Company’s warrants for the three months ended March 31, 2020:

	Warrants Outstanding
	Number of Shares		Weighted-  Average Exercise Price		Weighted - Average Remaining  Contractual  Term in years)		Aggregate Intrinsic Value (in 000's) (1)
Balance as of December 31, 2019		22,262,608	$	0.31
Granted		24,900,000		0.15
Balance as of March 31, 2020		47,162,608	$	0.23		2.7
Exercisable as of March 31, 2020		47,162,608	$	0.23		2.7	$	-

(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying warrants and the closing stock price of $0.08 for our common stock on March 31, 2020.

In connection to the 2020 Debentures, see Note 5 – Convertible Debt, the Company issued three-year Warrants to purchase 24,900,000 shares of common stock to the purchasers. The Warrants have an exercise price of $0.15 per share, and may be exercised cashlessly if the Company fails to maintain an effective registration statement at any time beginning six months after issuance. Of this amount Warrants to purchase 4,125,000 shares were issued to four directors and an entity in which one officer of the Company is a majority owner and co-manager.