WARRANTS AND STOCK BASED COMPENSATION

12 Months Ended

Dec. 31, 2018

Stock Options And Warrants

WARRANTS AND STOCK BASED COMPENSATION

Warrants

 On July 26, 2017, the Company commenced an offering of Senior Secured Promissory Notes (the “Secured Notes”) in the aggregate principal amount of up to $1.5 million to certain accredited investors (the “Secured Note Financing”). The amount available was subsequently raised to $2.3 million. As additional consideration for participating in the Secured Note Financing, investors received five-year warrants, exercisable for $0.15 per share, to purchase that number of shares of the Company’s Common Stock equal to 50% of the principal amount of the Secured Note purchased, divided by $0.15 per share. Between July 26, 2017 and December 31, 2018, the Company offered and sold Secured Notes in the aggregate principal amount of $2,465,000 and issued Warrants to purchase up to 8,216,671 shares of Common Stock to participating investors.

A summary of the Company’s warrant activity for the years ended December 31, 2018 and 2017 is presented below:

	Warrants Outstanding			Weighted Average Exercise Price
Outstanding, December 31, 2016		101,396,416		$	0.15
Granted		68,666,690			-
Exercised		-			-
Expired		-			-
Exchanged		(158,080,242	)		0.15
Outstanding, December 31, 2017		11,982,864		$	0.17
Granted		1,383,334			0.15
Exercised		-			-
Expired		(3,304,944	)		0.22
Exchanged		-			-
Outstanding, December 31, 2018		10,061,254		$	0.15

As of December 31, 2018, the Company had the following outstanding warrants to purchase shares of its Common Stock:

Warrants Outstanding		Weighted Average Exercise Price Per Share		Weighted Average Remaining Life (Yrs.)
	9,633,621	$	0.15		3.49
	427,633	$	0.19		1.97
	10,061,254	$	0.15		3.42

Non-Qualified Stock Options

During the year ended December 31, 2018, the Company granted options to a certain employee to purchase a total of 200,000 shares of Common Stock with an exercise price of $0.025, which expire five years from the date of issuance. Also, during the year ended December 31, 2018, the Company granted options to certain employees to purchase a total of 70,424,891 shares of Common Stock with an exercise price of $0.015, which expire ten years from the date of issuance. These options vest upon a change of control transaction as defined in the Company’s Stock Incentive Plan. Also, during the year ended December 31, 2018, the company reset the exercise price and extended the expiration date of options to certain employees and certain members of the Company’s Board of Directors. The reset options gave the holders the option to purchase an aggregate total of 19,999,935 shares of Common Stock. The exercise prices were reset to $0.025 per common share, and the expiration dates were extended five years from the date of the reset. The original exercise prices of these options were between $0.07 and $0.15 per share, and the original expiration dates ranged from September 2021 to September 2022.

              The weighted average estimated fair value per share of the stock options at grant date was $0.007 and $0.015 per share, respectively. The value of the options for which the exercise price was reset and the expiration date was extended in 2018 was also $0.008 per share. Such fair values were estimated using the Black-Scholes stock option pricing model and the following weighted average assumptions.

	2018
Expected life	30 months
Estimated volatility		75	%
Risk-free interest rate		1.1	%
Dividends

Stock option activity during the year ended December 31, 2018 is summarized as follows:

	Options Outstanding			Weighted Average Exercise Price
Options outstanding at December 31, 2017		41,770,782		$	0.08
Exercised		-			-
Granted		70,624,891			0.015
Forfeited		(20,635,847	)		0.070
Expired		-			-
Options outstanding at December 31, 2018		91,759,826			0.018

Restricted Common Stock Awards

During the year ended December 31, 2018, the Company did not issue any shares of restricted stock. During the year, a total of 1,854,061 shares were forfeited.

As of December 31, 2018, no shares were unvested out of the total of 1,500,000 granted shares.

A summary of the Company’s restricted common stock activity for the years ended December 31, 2018 and 2017 is presented below:

	Restricted Common Stock Awards
Outstanding, December 31, 2016		12,772,229
Granted		3,591,240
Issued		(2,289,156	)
Forfeited		(10,720,252	)
Outstanding, December 31, 2017		3,354,061
Granted		-
Issued		-
Forfeited		(1,854,061	)
Outstanding, December 31, 2018		1,500,000