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Equity Incentive Plan

12 Months Ended

Dec. 31, 2018

Note 16 – Equity Incentive Plans

2014 Stock Ownership Plan

As of December 31, 2016, the Company had non-qualified stock options to purchase 6,177,600 shares of the Company’s common stock, with an exercise price of $0.00024, outstanding under the 2014 Stock Ownership Plan of Safari Resource Group, Inc. (the “2014 Stock Plan”). Upon the adoption of the Company’s 2017 Equity Incentive Plan (the “2017 Equity Plan”), there will be no further awards under the 2014 Stock Plan.

In March 2017, in a private transaction, certain principal shareholders of the Company, assigned to a former executive officer, non-qualified stock options to purchase 3,088,800 shares of the Company’s common stock outstanding under the 2014 Stock Plan. The principal shareholders informed the Company that they agreed to assign these options as an incentive (i) for the former executive officer to complete the negotiations with the Company’s convertible noteholders to convert their notes into shares of the Company’s common stock, and (ii) for the former executive officer to complete a private placement of the Company’s common stock. The former executive officer thereupon delivered a purported notice of exercise of the options to the Company just prior to the expiration of the options. Prior to the Company’s acceptance of the notice of exercise and issuances of these shares in response thereto, in May 2017, the former executive officer and the principal shareholders entered into a rescission agreement to nullify the March 2017 assignment transaction. Pursuant to their terms, these options have expired.

In March 2017, another former executive officer of the Company, holding non-qualified options to 3,088,800 shares of the Company’s common stock outstanding under the 2014 Stock Plan, requested to exercise options with respect to 3,000,000 shares at an exercise price of $0.00024 per share. The Board did not approve the request for the issuance of the common stock underlying these exercised options and, as a result, the Company has treated these options as expired.

As of December 31, 2018 and 2017, there are no options outstanding under the 2014 Stock Plan.

The following table summarizes certain details regarding the options under the 2014 Stock Plan are set forth in the table below:

	Number of Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value of Outstanding Options
Outstanding, January 1, 2017		6,177,600		$	0.00024		0.2	$	1,155,211
Granted		-			-		-
Exercised		-			-		-
Forfeited		-			-		-
Expired		(6,177,600	)	$	0.00024		-
Outstanding, December 31, 2017		-
Vested and exercisable, December 31, 2017		-

2017 Equity Incentive Plan

On August 1, 2017, the Board adopted and approved the 2017 Equity Plan in order to attract, motivate, retain, and reward high-quality executives and other employees, officers, directors, consultants, and other persons who provide services to the Company by enabling such persons to acquire an equity interest in the Company. Under the 2017 Equity Plan, the Board (or the compensation committee of the Board, if one is established) may award stock options, stock appreciation rights (“SARs”), restricted stock awards (“RSAs”), restricted stock unit awards (“RSUs”), shares granted as a bonus or in lieu of another award, and other stock-based performance awards. The 2017 Equity Plan allocates 50,000,000 shares of the Company’s common stock (“Plan Shares”) for issuance of equity awards under the 2017 Equity Plan. As of December 31, 2018, the Company has granted, under the 2017 Equity Plan, awards in the form of RSAs for services rendered by independent directors and consultants, non-qualified stock options, RSUs and stock bonus awards.

The total unrecognized compensation expense for unvested non-qualified stock options, RSUs and stock bonus awards at December 31, 2018 was $702,169, which will be recognized over approximately 2.0 years. This unrecognized compensation expense does not include the potential future compensation expense related to non-qualified stock options which are subject to vesting based on certain revenue thresholds for 2019 being satisfied (the “Performance-based Awards”). As of December 31, 2018 and the grant date, the Company has determined that the likelihood of performance levels being obtained is remote. The unrecognized compensation expense with respect to these Performance-based Awards at December 31, 2018 was $245,553.

Restricted Stock Awards

During the year ended December 31, 2017, the Company awarded 2,420,494 shares of restricted stock under the 2017 Equity Plan in consideration of services rendered to the Company by certain employees, independent directors and consultants. These restricted shares were fully vested at the time of the award and the aggregate value attributable to these shares was $304,035, as calculated using the fair value of the Company’s common stock on date the Board approved these awards. As of December 31, 2017, the independent directors and a consultant were owed cash fees of $27,750 which were paid in the form of fully vested restricted shares in February 2018.

During the year ended December 31, 2018, the Company awarded 1,406,055 shares of restricted stock under the 2017 Equity Plan in consideration of services rendered to the Company by certain independent directors and consultants. These restricted shares were fully vested at the time of the award and the aggregate value attributable to these shares was $301,650, as calculated using the fair value of the Company’s common stock on date the Board approved these awards. As of December 31, 2018, the independent directors were owed cash fees of $15,000 which were paid in the form of fully vested restricted shares in January 2019.

Non-Qualified Stock Options

The Company uses the Black-Scholes Model to determine the fair value of options granted. Option-pricing models require the input of highly subjective assumptions, particularly for the expected stock price volatility and the expected term of options. Changes in the subjective input assumptions can materially affect the fair value estimate. The expected stock price volatility assumptions are based on the historical volatility of the Company’s common stock over periods that are similar to the expected terms of grants and other relevant factors. The Company derives the expected term based on an average of the contract term and the vesting period taking into consideration the vesting schedules and future employee behavior with regard to option exercise. The risk-free interest rate is based on U.S. Treasury yields for a maturity approximating the expected term calculated at the date of grant. The Company has never paid any cash dividends on its common stock and the Company has no intention to pay a dividend at this time; therefore, the Company assumes that no dividends will be paid over the expected terms of option awards.

The Company determines the assumptions used in the valuation of option awards as of the date of grant. Differences in the expected stock price volatility, expected term or risk-free interest rate may necessitate distinct valuation assumptions at those grant dates. As such, the Company may use different assumptions for options granted throughout the year. The valuation assumptions used to determine the fair value of each option award on the date of grant were: expected stock price volatility 114.32% - 118.90%; expected term in years 1.5 - 7.5 and risk-free interest rate 1.32% - 2.87%.

A summary of the non-qualified stock options granted to employees under the 2017 Equity Plan during the years ended December 31, 2018 and 2017 are presented in the table below:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value

Outstanding, December 31, 2016		-
Granted		12,530,000		$	0.121
Exercised		-			-
Forfeited		(2,235,000	)	$	0.122
Expired		(60,000	)	$	0.135
Outstanding, December 31, 2017		10,235,000		$	0.121		8.7	$	1,218,375
Granted		6,500,000		$	0.118
Exercised		(25,000	)	$	0.135
Forfeited		(6,083,332	)	$	0.147
Expired		(66,668	)	$	0.135
Outstanding, December 31, 2018		10,560,000		$	0.104		8.4	$	-
Exercisable, December 31, 2018		3,226,671		$	0.114		6.1	$	-
Outstanding vested and expected to vest, December 31, 2018		8,160,000		$	0.101		8.3	$	-

Performance options based on 2019 revenue thresholds - uncertain vesting as of December 31, 2018		2,400,000		$	0.116		8.7	$	-

A summary of non-vested non-qualified stock options activity for employees under the 2017 Equity Plan for the years ended December 31, 2018 and 2017 are presented in the table below:

	Number of Options			Weighted Average Grant-Date Fair Value		Aggregate Intrinsic Value		Grant-Date Fair Value

Nonvested, December 31, 2016		-
Granted		12,530,000		$	0.103			$	1,296,504
Vested		(1,885,008	)	$	0.082			$	153,981
Forfeited		(2,235,000	)	$	0.109			$	243,359
Expired		(60,000	)	$	0.122			$	7,310
Nonvested, December 31, 2017		8,349,992		$	0.107	$	1,000,499	$	891,855
Granted		6,500,000		$	0.102			$	663,569
Vested		(1,433,331	)	$	0.088			$	125,988
Forfeited		(6,083,332	)	$	0.132			$	800,680
Expired		-			-			$	-
Nonvested, December 31, 2018		7,333,329		$	0.086	$	-	$	628,756

For the years ended December 31, 2018 and 2017, the Company recorded $148,013 and $189,536 as compensation expense related to vested options issued to employees, net of forfeitures, respectively. As of December 31, 2018, total unrecognized share-based compensation related to unvested options was $578,486, of which $332,933 was related to time-based vesting and $245,553 was related to performance-based vesting.

As of December 31, 2018, the Company had granted non-qualified options to purchase 10,250,000 shares which were performance-based. At December 31, 2018, non-qualified options to purchase 3,600,000 shares were forfeited due to the failure to satisfy the 2017 and 2018 revenue-based performance thresholds and 4,250,000 shares were forfeited due to employee terminations. Of the remaining non-qualified options to purchase 2,400,000 shares which are performance-based, the Company has determined that the likelihood of the performance thresholds being satisfied is remote as of the date of grant and December 31, 2018; therefore, no expense was recognized.

A summary of the non-qualified stock options granted to directors under the 2017 Equity Plan during the years ended December 31, 2018 and 2017 are presented in the table below:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value ($000)

Outstanding, December 31, 2016		-			-
Granted		1,800,000		$	0.135
Exercised		-			-
Forfeited/Cancelled		(900,000	)	$	0.135
Expired		-			-
Outstanding, December 31, 2017		900,000		$	0.135		9.6	$	94,500
Granted		-			-
Exercised		-			-
Forfeited/Cancelled		-			-
Expired		-			-
Outstanding, December 31, 2018		900,000		$	0.135		8.6	$	-
Exerciseable, December 31, 2018		900,000		$	0.135		8.6	$	-

A summary of non-vested non-qualified stock options activity for directors under the 2017 Equity Plan for the years ended December 31, 2018 and 2017 are presented in the table below:

	Number of Options			Weighted Average Grant-Date Fair Value		Aggregate Intrinsic Value

Nonvested, December 31, 2016		-
Granted		1,800,000		$	0.123
Vested		(450,000	)	$	0.123
Forfeited		(900,000	)	$	0.123
Expired		-
Nonvested, December 31, 2017		450,000		$	0.123	$	52,470
Granted		-			-
Vested		(450,000	)	$	0.123
Forfeited		-			-
Expired		-			-
Nonvested, December 31, 2018		-			-	$	-

For the years ended December 31, 2018 and 2017, the Company recorded $12,205 and $166,187 as compensation expense related to vested options issued to directors, respectively. As of December 31, 2018, there was no unrecognized share-based compensation related to unvested options issued to directors.

Restricted Stock Units

A summary of the RSUs awarded to employees, directors and consultants under the 2017 Equity Plan during the years ended December 31, 2018 and 2017 are presented in the table below:

	Number of Units			Weighted Average Grant-Date Fair Value		Aggregate Intrinsic Value

Outstanding, December 31, 2016		-
Granted		14,000,000		$	0.122
Vested and settled with share issuance		(200,000	)	$	0.103
Forfeited		-
Outstanding, December 31, 2017		13,800,000		$	0.122	$	3,312,000
Granted		5,514,736		$	0.185
Vested and settled with share issuance¹		(6,447,368	)	$	0.153
Forfeited		(3,000,000	)	$	0.112
Outstanding, December 31, 2018		9,867,368		$	0.140	$	730,185
Vested but not settled as of December 31, 2018²		6,750,000		$	0.121	$	499,500
Expected to vest as of December 31, 2018		3,117,368		$	0.181	$	230,685

	¹Includes 1,000,000 RSUs that were vested as of December 31, 2018 and settled with the issuance of 1,000,000 shares of common stock in January 2019.

	²These RSUs have not been settled due to the failure of the recipient to pay the required withholding taxes based on the value of the underlying shares at the time of vesting. The Company has commenced litigation against the recipient to have these RSUs canceled.

For the years ended December 31, 2018 and 2017, the Company recorded $1,295,368 and $765,055 as compensation expense related to vested RSUs issued to employees, directors and consultants. As of December 31, 2018, total unrecognized share-based compensation related to unvested RSUs was $325,027, all of which was related to time-based vesting. The total intrinsic value of RSUs vested and settled with share issuance was $1,289,500 and $20,499 for the years ended December 31, 2018 and 2017, excluding the intrinsic value of $1,035,750 related to RSUs, which the Company is seeking to cancel, that vested in 2018 but have not been settled due to the recipient’s failure to pay required withholding taxes.

During 2018, 3,000,000 RSUs granted to a former executive officer and subject to performance-based vesting were forfeited due to termination of employment. The Company had not recognized any expense related to these RSUs prior to forfeiture since the likelihood of the performance thresholds being satisfied was determined to be remote.

Incentive Stock Bonuses

The Company has entered into certain “at-will” employment agreements with certain employees. Under these agreements, the employees are eligible to receive special incentive stock bonuses, provided the Board has determined, in its sole discretion, that the employee’s performance has been average or better for the applicable special bonus period. This special stock incentive bonus is payable only if the employee continues in the employment of the Company.

For accounting purposes, the Company treats these special incentive stock bonuses as vesting over each bonus’s service period based on the fair value of the award at the time of grant. Even though these bonuses are subject to Board approval, the awards are vested over each service period because it is more likely than not that the Board will approve the award based on the “average or better” employee performance standard. Since the awards are denominated in shares of common stock, the fair value of the vested bonus is charged to additional paid-in capital.

A summary of the incentive stock bonus awards granted to employees under the 2017 Equity Plan during the years ended December 31, 2018 and 2017 are presented in the table below:

	Number of Shares			Weighted Average Grant-Date Fair Value		Aggregate Intrinsic Value

Unvested, December 31, 2016		-		$	-
Awarded		8,600,000		$	0.113
Vested		(1,560,000	)	$	0.113
Forfeited		-
Unvested, December 31, 2017		7,040,000		$	0.113	$	1,689,600
Awarded		4,000,000		$	0.170
Vested		(1,860,000	)	$	0.113
Forfeited		(7,500,000	)	$	0.144
Unvested, December 31, 2018		1,680,000		$	0.112	$	124,320

For the years ended December 31, 2018 and 2017, the Company recorded $165,208 and $364,483 as compensation expense related to vested stock bonus awards issued to employees, net of forfeitures of $404,689 and $0, respectively. As of December 31, 2018, total unrecognized share-based compensation related to unvested stock bonus awards was $44,209. During the year ended December 31, 2018, the Company issued 3,420,000 shares in payment of the vested stock bonus awards approved by the Board which had a total intrinsic value of $624,520. Subsequent to December 31, 2018, the Company issued 560,000 shares in payment of the vested stock bonus awards approved by the Board which had a total intrinsic value of $42,560. See Note 18.