Stock Options

3 Months Ended

Mar. 31, 2022

Stock Options

Stock Options

Note 5 – Stock Options

Total stock-based compensation is comprised of the following for the three months ended March 31, 2022 and 2021:

	Three Months Ended March 31,
	2022		2021
Stock-based compensation – stock option grants	$	76,500	$	—
Stock-based compensation – restricted stock grants		81,250		81,250
Stock-based compensation – warrants issued for services pursuant to USNG Letter Agreement (See Note 7)		72,156		—
Total stock-based compensation	$	229,906	$	81,250

The Company applies ASC 718, Stock Compensation, which requires companies to recognize compensation expense for share-based payments based on the estimated fair value of the awards. ASC 718 also requires tax benefits relating to the deductibility of increases in the value of equity instruments issued under share-based compensation arrangements to be presented as financing cash inflows in the statement of cash flows. Compensation cost is recognized based on the grant-date fair value for all share-based payments granted and is estimated in accordance with the provisions of ASC 718.

At the Annual Meeting of Stockholders held on October 13, 2021, the stockholders approved the 2021 Plan and the Company reserved 5,000,000 shares for issuance under the 2021 Plan. At the Annual Meeting of Stockholders held on September 25, 2015, the stockholders approved the 2015 Plan and the Company reserved 500,000 shares for issuance under the 2015 Plan.

The 2021 Plan and the 2015 Plan provide for under which both incentive and non-statutory stock options may be granted to employees, officers, non-employee directors and consultants. An aggregate of 5,500,000 shares of the Company’s Common Stock is reserved for issuance under the 2021 and 2015 Plan. Options granted under the 2021 Plan and 2015 Plan allow for the purchase of shares of Common Stock at prices not less than the fair market value of such stock at the date of grant, become exercisable immediately or as directed by the Company’s Board of Directors and generally expire ten years after the date of grant. The Company has issued stock options and restricted stock awards that are not pursuant to a formal plan with terms similar to the 2021 and 2015 Plans.

As of March 31, 2022, 5,500,000 shares were available for future grants under the 2021 Plan and the 2015 Plan. All other Plans have now expired.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model, which requires the input of subjective assumptions, including the expected term of the option award, expected stock price volatility and expected dividends. These estimates involve inherent uncertainties and the application of management judgment. For purposes of estimating the expected term of options granted, the Company aggregates option recipients into groups that have similar option exercise behavioral traits. Expected volatilities used in the valuation model are based on the expected volatility based on historical volatility. The risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The Company’s forfeiture rate assumption used in determining its stock-based compensation expense is estimated based on historical data. The actual forfeiture rate could differ from these estimates. There were 1,800,000 options granted during June 2021.

Stock option grants

The following table summarizes stock option activity for the three months ended March 31, 2022 and 2021:

	Number of Options			Weighted Average Exercise Price Per Share			Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2020		332,000		$	41.86			1.28 years	$	—
Granted		—			—
Exercised		—			—
Forfeited		(55,000	)		(50.25	)
Outstanding at March 31, 2021		277,000		$	39.75			1.27 years	$	—
Outstanding and exercisable at March 31, 2021		277,000		$	39.75			1.27 years	$	—
Outstanding and exercisable at December 31, 2021		1,892,000		$	1.93			9.07 years	$	—
Granted		—			—
Exercised		—			—
Forfeited		—			—
Outstanding at March 31, 2022		1,892,000		$	1.93			8.82 years	$	—
Outstanding and exercisable at March 31, 2022		92,000		$	30.00			1.79 years	$	—

The following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable options under the Company’s option plans as of March 31, 2022:

		Outstanding options		Exercisable options
	Exercise price per share	Number of options	Weighted average remaining contractual life	Number of options	Weighted average remaining contractual life
$	0.50	1,800,000	9.18 years	—	—
$	30.00	92,000	1.79 years	92,000	1.79 years
	Total	1,892,000	8.82 years	92,000	1.79 years

The following is the assumptions used in calculating the estimated grant-date fair value of the stock options granted during 2021:

	As of June 4, 2021 (issuance date)
Volatility – range		286.6	%
Risk-free rate		1.56	%
Contractual term		10.0 years
Exercise price	$	0.50
Number of options in aggregate		1,800,000

The Company recorded stock-based compensation expense in connection with the vesting of stock options granted aggregating $76,500 and $-0- for the three months ended March 31, 2022 and 2021, respectively.

The total grant date fair value of the 1,800,000 stock options issued during 2021 was $305,997 in total or $0.17 per share and there were no stock options granted during the three months ended March 31, 2022.

The intrinsic value as of March 31, 2022 related to the vested and unvested stock options as of that date was $-0-. The unrecognized compensation cost as of March 31, 2022 related to the unvested stock options as of that date was $51,000 which will be amortized over the next two months in accordance with the respective vesting scale.

Restricted stock grants.

During August 2020 the Board of Directors granted 5,000,000 shares of restricted stock awards to our officers, directors and a consultant. During October 2019 the Board of Directors granted 2,000,000 shares of restricted stock awards to our new Chief Operating Officer. Restricted stock awards are valued on the date of grant and have no purchase price for the recipient. Restricted stock awards typically vest over a period of time generally corresponding to yearly anniversaries of the grant date. Unvested shares of restricted stock awards may be forfeited upon the termination of service of employment with the Company, depending upon the circumstances of termination. Except for restrictions placed on the transferability of restricted stock, holders of unvested restricted stock have full stockholder’s rights, including voting rights and the right to receive cash dividends.

A summary of all restricted stock activity under the equity compensation plans for the three months ended March 31, 2022 and 2021 is as follows:

	Number of Restricted shares			Weighted average grant date fair value
Nonvested balance, December 31, 2020		3,750,000		$	0.13
Granted		—			—
Vested		(625,000	)		(0.13	)
Forfeited		—			—
Nonvested balance, March 31, 2021		3,125,000		$	0.13
Nonvested balance, December 31, 2021		1,250,000		$	0.13
Granted		—			—
Vested		(625,000	)		(0.13	)
Forfeited		—			—
Nonvested balance, March 31, 2022		625,000		$	0.13

The Company recorded stock-based compensation expense in connection with the issuance/vesting of restricted stock grants aggregating $81,250 and $81,250 during the three months ended March 31, 2022 and 2021, respectively.

The Company estimated the fair market value of these restricted stock grants based on the closing market price on the date of grant. As of March 31, 2022, there were $81,250 of total unrecognized compensation costs related to all remaining non-vested restricted stock grants, which will be amortized over the next three months in accordance with the respective vesting scale.

The nonvested balance of restricted stock vests as follows:

Years ended	Number of shares
2022		625,000
2023		—