General form of registration statement for all companies including face-amount certificate companies

Stock Option Plans

v3.10.0.1
Stock Option Plans
9 Months Ended 12 Months Ended
Sep. 30, 2018
Dec. 31, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]    
Stock Option Plans

NOTE 9 – STOCK OPTION PLANS

 

On February 7, 2014, the Company adopted the 2014 Equity Compensation Plan. Under this plan, the Company may issue options to purchase shares of common stock to employees, directors, advisors, and consultants. The aggregate number of shares that could be issued under this plan upon adoption was 30,420,148. On April 16, 2015, the majority stockholder of the Company approved an increase in the Company’s 2014 Equity Compensation Plan by 15 million shares.

 

Under the terms of the 2014 Equity Compensation Plan and the 2006 Stock Incentive Plan (collectively, the “Plans”), incentive stock options may be granted to employees at a price per share not less than 100% of the fair market value at date of grant. If the incentive stock option is granted to a 10% stockholder, then the purchase or exercise price per share shall not be less than 110% of the fair market value per share of common stock on the grant date. Non-statutory stock options and restricted stock may be granted to employees, directors, advisors, and consultants at a price per share, not less than 100% of the fair market value at date of grant. Options granted are exercisable, unless specified differently in the grant documents, over a default term of ten years from the date of grant and generally vest over a period of four years.

  

A summary of stock option activity is as follows:

 

    Options     Weighted average exercise price     Weighted average remaining contractual term in years     Aggregate intrinsic value  
Outstanding January 1, 2017     36,821,969     $ 0.41       5.94     $ 301,273  
Exercisable January 1, 2017     36,771,969     $ 0.41       5.94     $ 299,273  
Canceled     -                          
Granted     2,161,458                          
Exercised     (770,000 )     -                  
Forfeited     -                          
Outstanding December 31, 2017     38,213,427     $ 0.41       5.23     $ 562,456  
Exercisable December 31, 2017     36,213,427     $ 0.41       4.98     $ 562,456  
Canceled     (350,000 )                        
Granted     1,833,334                          
Exercised     (156,997 )     -                  
Forfeited     (43,003 )                        
Outstanding September 30, 2018     39,496,761     $ 0.41       4.64     $ 986,808  
Exercisable September 30, 2018     36,580,097     $ 0.41       4.28     $ 963,475  

 

The aggregate intrinsic value in the table above is before applicable income taxes and represents the excess amount over the exercise price option recipients would have received if all options had been exercised on September 30, 2018, based on a valuation of the Company’s stock for that day.

 

A summary of the Company’s non-vested options for the year ended December 31, 2017, and nine-months ended September 30, 2018, are presented below:

 

Non-vested at January 1, 2017     50,000  
Granted     2,161,458  
Vested     (211,458 )
Canceled     -  
Non-vested at December 31, 2017     2,000,000  
Granted     1,833,334  
Vested     (566,670 )
Canceled     (350,000 )
Non-vested at September 30, 2018     2,916,664  

 

The Company estimates the fair value of stock options granted on each grant date using the Black-Scholes option valuation model and recognizes an expense ratably over the requisite service period. The range of fair value assumptions related to options issued were as follows for the:

 

    Nine-months ended
September 30, 2018
   

Year ended

December 31, 2017

 
Dividend yield     0.0 %     0.0 %
Risk-free rate     2.38% - 2.80 %     1.89% - 2.26 %
Expected volatility     217% - 226 %     221% - 232 %
Expected term     3 - 7 years       5 - 7 years  

 

The expected volatility was calculated based on the historical volatility of the Company. The risk-free interest rate used was based on the U.S. Treasury constant maturity rate in effect at the time of grant for the expected term of the stock options to be valued. The expected dividend yield was zero, because the Company does not anticipate paying a dividend within the relevant timeframe. Due to a lack of historical information needed to estimate the Company’s expected term, it was estimated using the simplified method allowed.

 

The Company records forfeitures as they occur and reverses compensation cost previously recognized, in the period the award is forfeited, for an award that is forfeited before completion of the requisite service period.

 

Stock option exercise

 

During the nine-months ended September 30, 2018, the Company issued 156,997 shares of common stock in connection with the cashless exercise of stock options for 100,000, 50,000, and 50,000 shares of common stock exercisable at $0.06 per share with 43,003 shares of common stock withheld with an aggregate fair market value equal to the aggregate exercise price.

 

During the year ended December 31, 2017, the Company issued 645,288 shares of common stock in connection with the cashless exercise of stock options for 100,000, 45,000, and 625,000 shares of common stock exercisable at $0.155, $0.06, and $0.06, respectively, per share with 124,712 shares of common stock withheld with an aggregate fair market value equal to the aggregate exercise price.

 

Stock based compensation

 

The Company recognized stock-based compensation expense related to options during the:

 

    Nine-months ended September 30  
    2018     2017  
    Number     Amount     Number     Amount  
                         
Employee compensation     450,000     $ 156,875       -     $ -  
Compensation for outside services     375,000       76,250       50,000       3,500  
Director compensation     -       -       161,458       25,000  
                                 
Total     825,000     $ 233,125       211,458     $ 28,500  

NOTE 8 – STOCK OPTION PLANS

 

On February 7, 2014, the Company adopted the 2014 Equity Compensation Plan. Under this plan, the Company may issue options to purchase shares of common stock to employees, directors, advisors, and consultants. The aggregate number of shares that may be issued under this plan is 30,420,148. On April 16, 2015, the majority stockholder of the Company approved an increase in the Company’s 2014 Equity Compensation Plan by 15 million shares.

 

Under the terms of the 2014 Equity Compensation Plan and the 2006 Stock Incentive Plan (collectively, the “Plans”), incentive stock options may be granted to employees at a price per share not less than 100% of the fair market value at date of grant. If the incentive stock option is granted to a 10% stockholder, then the purchase or exercise price per share shall not be less than 110% of the fair market value per share of common stock on the grant date. Non-statutory stock options and restricted stock may be granted to employees, directors, advisors, and consultants at a price per share, not less than 100% of the fair market value at date of grant. Options granted are exercisable, unless specified differently in the grant documents, over a default term of ten years from the date of grant and generally vest over a period of four years.

 

A summary of stock option activity is as follows:

 

    Options     Weighted average exercise price     Weighted average remaining contractual term in years     Aggregate intrinsic value  
Outstanding January 1, 2016     34,167,354     $ 0.47       6.57     $ 974,066  
Exercisable January 1, 2016     34,167,354     $ 0.47       6.57     $ 974,066  
Canceled     -                          
Granted     6,156,580                          
Exercised     -                          
Forfeited     (3,501,965 )                        
Outstanding December 31, 2016     36,821,969     $ 0.41       5.94     $ 301,273  
Exercisable December 31, 2016     36,771,969     $ 0.41       5.94     $ 299,273  
Canceled     -                          
Granted     2,161,458                          
Exercised     (770,000 )                        
Forfeited     -                          
Outstanding December 31, 2017     38,213,427     $ 0.41       5.23     $ 562,456  
Exercisable December 31, 2017     36,213,427     $ 0.41       4.98     $ 562,456  

 

The aggregate intrinsic value in the table above is before applicable income taxes and represents the excess amount over the exercise price option recipients would have received if all options had been exercised on December 31, 2017, based on a valuation of the Company’s stock for that day.

  

A summary of the Company’s non-vested options for the years ended December 31, 2017 and year ended December 31, 2016 are presented below:

 

Non-vested at January 1, 2016     -  
Granted     6,156,580  
Vested     (6,106,580 )
Forfeited     -  
Non-vested at December 31, 2016     50,000  
Granted     2,161,458  
Vested     (211,458 )
Forfeited     -  
Non-vested at December 31, 2017     2,000,000  

 

The Company estimates the fair value of stock options granted on each grant date using the Black-Scholes option valuation model and recognizes an expense ratably over the requisite service period. The range of fair value assumptions related to options issued outstanding were as follows for the years ended December 31:

 

    2017     2016  
Dividend yield     0.0 %     0.0 %
Risk-free rate     1.89% - 2.26 %     0.80% - 1.03 %
Expected volatility     221% - 232 %     141% - 225 %
Expected term     5 - 7 years       5 years  

 

The expected volatility was calculated based on the historical volatilities of publicly traded peer companies, determined by the Company, and the historical volatility of the Company. The risk-free interest rate used was based on the U.S. Treasury constant maturity rate in effect at the time of grant for the expected term of the stock options to be valued. The expected dividend yield was zero, as the Company does not anticipate paying a dividend within the relevant timeframe. Due to a lack of historical information needed to estimate the Company’s expected term, it was estimated using the simplified method allowed.

 

The Company records forfeitures as they occur and reverses compensation cost previously recognized, in the period the award is forfeited, for an award that is forfeited before completion of the requisite service period.

 

Stock option exercise

 

During the year ended December 31, 2017, the Company issued 645,288 shares of common stock in connection with the cashless exercise of stock options for 100,000, 45,000, and 625,000 shares of common stock at $0.155, $0.06, and $0.06, respectively, per share with 124,712 shares of common stock withheld with an aggregate fair market value equal to the aggregate exercise price.

 

The Company recognized stock based compensation expense related to options during the:

 

    Years ended December 31  
    2017     2016  
    Number     Amount     Number     Amount  
                         
In lieu of accrued salaries     -     $ -       3,796,385     $ 227,784  
In lieu of accrued fees for outside services     -       -       1,107,417       66,445  
Compensation for outside services     50,000       3,500       50,000       3,500  
Employee compensation (unvested)     2,000,000       33,271       -       -  
Director compensation     161,458       25,000       1,152,778       79,167  
                                 
Total     2,211,458     $ 61,771       6,106,580     $ 376,896