Quarterly report pursuant to Section 13 or 15(d)

Stock Option Plans

Stock Option Plans
3 Months Ended
Mar. 31, 2019
Share-based Payment Arrangement [Abstract]  
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 reserved 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. On December 4, 2018, the stockholders of the Company approved an increase in the Company’s 2014 Equity Compensation Plan by an additional 5 million shares, for a total of 50,420,148 shares reserved under the plan.


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
exercise price
term in years
intrinsic value
Outstanding January 1, 2018     38,213,427     $ 0.41       5.23     $ 562,456  
Exercisable January 1, 2018     36,213,427     $ 0.41       4.98     $ 562,456  
Canceled     (350,000 )                        
Granted     2,833,334                          
Exercised     (200,000 )                        
Forfeited     -                          
Outstanding December 31, 2018     40,496,761     $ 0.40       4.52     $ 986,808  
Exercisable December 31, 2018     37,157,179     $ 0.41       4.10     $ 966,808  
Canceled     -                          
Granted     -                          
Exercised     -                          
Forfeited     -                          
Outstanding March 31, 2019     40,496,761     $ 0.40       4.28     $ 664,331  
Exercisable March 31, 2019     37,559,261     $ 0.41       3.90     $ 660,435  


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 March 31, 2019, based on a valuation of the Company’s stock for that day.


A summary of the Company’s non-vested options for the three-months ended March 31, 2019 and year ended December 31, 2018, are presented below:


Non-vested at January 1, 2018     2,000,000  
Granted     2,833,334  
Vested     (1,143,752 )
Canceled     (350,000  
Non-vested at December 31, 2018     3,339,582  
Granted     -  
Vested     (402,082 )
Canceled     -  
Non-vested at March 31, 2019     2,937,500  


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:


March 31, 2019
December 31, 2018
Dividend yield     0.0 %     0.0 %
Risk-free rate     2.38% - 3.04 %     2.38% - 3.04 %
Expected volatility     214% - 226 %     214% - 226 %
Expected term     3 - 7 years       3 - 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 year ended December 31, 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.


Stock based compensation


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


    Three-months ended March 31  
    2019     2018  
    Amount     Amount  
Service provider compensation   $ 44,375     $ 9,375  
Employee compensation     42,125       60,125  
Total   $ 86,500     $ 69,500