| STOCK OPTION PLAN AND WARRANTS | NOTE 14 – STOCK OPTION PLAN AND WARRANTS Incentive Compensation Plan The Plan provides for the issuance of qualified options and other equity awards to all employees and non-qualified options and other equity awards to directors, consultants and other service providers. A summary of the status of stock options outstanding under the Plan as of September 30, 2016 and December 31, 2015 is as follows:
9/30/2016 12/31/2015
Weighted Average Weighted Average
Number of Shares Exercise Number of Shares Exercise
Outstanding at beginning of year 11,103,275 $ 0.78 11,033,675 $ 1.05
Granted 3,020,134 $ 0.03 6,299,600 $ 0.29
Exercised - -
Expired and Cancelled (3,772,386 ) $ 0.89 (6,230,000 ) $ 0.77
Outstanding, end of period 10,351,023 $ 0.53 11,103,275 $ 0.78
Exercisable at end of period 8,085,923 $ 0.66 10,328,925 $ 0.82 During the three and nine months ended September 30, 2016, the Company did not grant any stock options to employees. On May 17, 2016, each non-executive member of the Board (Morris Garfinkle, Dan Jeffery and Edward B. Smith III) was granted pursuant to the Plan an option to purchase an aggregate 1,006,711 shares of common stock (the equivalent of $30,000 based on the common stock’s closing price of $0.0298 on the grant date) for a total of 3,020,134 shares of common stock at an exercise price of $0.0298 per share. These stock options vest 25% on date of grant and 25% every 90, 180 and 270 days subsequent to the grant date and expire ten years after the date of the grant. As of September 30, 2016, the unrecognized compensation cost related to all non- vested share- based compensation arrangements granted under the Plan was $80,453. During the nine months ended September 30, 2015, the Company granted 6,299,600 options at an exercise price of $0.29 per share valued at $1,845,892. Stock- based compensation expense for both the three and nine months ended September 30, 2015 was $152,712 and $261,459 respectively. As of September 30, 2015, the unrecognized compensation cost related to all non- vested share- based compensation arrangements granted under the Plan was $388,385. Of this amount, $158,959 was recognized during the fourth quarter of fiscal 2015. During the nine months ended September 30, 2016 and September 30, 2015, there were no stock options exercised either for cash or on a cashless basis. The fair value of each stock option granted is estimated on the date of grant using the Black- Scholes option valuation model. This model uses the assumptions listed in the table below for stock options granted in 2015 and 2016. Expected volatilities are based on the historical volatility of the Company’s stock. The risk- free rate for periods within the expected life of the options is based on the U.S. Treasury yield curve in effect at the time of grant.
5/17/2016 6/30/2015
Weighted average fair value per option granted 0.0298 0.1431 – 0.3606
Risk-free interest rate 1.2 % 1.00% - 1.54 %
Expected dividend yield 0.0 % 0.0 %
Expected lives 2.7 3.0
Expected volatility 201.10 % 86.22% - 120.51 % Stock options outstanding at September 30, 2016 are as follows:
Range of Exercise Prices Options Outstanding Weighted Average Remaining Contractual Life Weighted Average Exercise Price Options Exercisable
$0.01 - $1.50 8,854,489 4.8 $ 0.33 6,589,389
$1.51 - $3.00 1,496,534 1.3 $ 1.67 1,496,534
$3.01 - $5.00 - - $ - -
10,351,023 2.8 $ 0.53 8,085,923 Warrants As of September 30, 2016, the Company had warrants outstanding to purchase 52,897,601 shares of the Common Stock, at prices ranging from $0.35 to $0.64 per share. These warrants expire at various dates through July 2021. The summary of the status of the warrants issued by the Company as of September 30, 2016 and December 31, 2015 are as follows: AGRITECH WORLDWIDE, INC. (FORMERLY Z TRIM HOLDINGS, INC.) SUMMARY OF WARRANTS
9/30/2016 12/31/2015
Number of Shares of Common Stock Underlying Warrants
Weighted Average Exercise Price
Number of Shares of Common Stock Underlying Warrants
Weighted Average Exercise Price
Outstanding at beginning of year 50,957,780 $ 0.52 16,446,351 $ 1.44
Granted 6,550,000 $ 0.64 87,825,204 $ 0.42
Exercised (4,610,179 ) $ 0.43 (53,095,204 ) $ 0.66
Cashless Exercises - $ - - -
Expired and Cancelled - (218,571 ) $ 0.66
52,897,601 $ 0.50 50,957,780 $ 0.52
Outstanding, end of period 52,897,601 $ 0.50 50,957,780 $ 0.52
Exercisable at end of period 52,897,601 $ 0.50 50,957,780 $ 0.52 Effective January 1, 2015, the Company and its landlord executed an amendment to the current lease extending the lease until July 14, 2015. Commencing on May 1, 2015, the parties agreed to a monthly base rent of $10,681 plus property taxes. The Company also agreed to pay $71,125 in rental arrears on April 30, 2015 and another $71,125 in rental arrears on July 1, 2015. Finally, the parties agreed that the Company will deliver to the landlord 20,025 shares of its Preferred Shares which shares are convertible to common stock at the landlord’s option at .088 per preferred share. Also, the Company issued a five-year warrant to the landlord to purchase 171,454 shares of Common Stock at $0.64 per share. On January 8, 2015, in conjunction with the sale of units consisting of convertible preferred stock, the “Company”), issued warrants (the “Initial Warrant”) to acquire 8.56 shares of the Company’s common stock at an exercise price of $0.64 per share. In addition, the Company agreed to issue to each of the investors in the first round of financing an additional warrant to acquire (the “Additional Warrant” and together with the Initial Warrant, the “Warrants”) to acquire 3.64 shares of the Common Stock at an exercise price of $0.64 per share. The Additional Warrants issued are exercisable for an aggregate of 946,400 shares of the Common Stock. The Warrants expire on the fifth anniversary of their issuance, may be exercised on a cashless basis, are subject to full ratchet price anti-dilution protection and entitled to registration rights as set forth below. Due to the anti-dilution provisions of some of the outstanding warrants before the January 8, 2015 transaction, the exercise price on 15,512,057 warrants has been reduced to $0.35 and the number of shares of common stock into which the warrants are now exercisable has been adjusted such that the warrants are now exercisable into 54,400,204 shares of common stock. In addition to the foregoing, the members of the Company’s Board of Directors agreed to receive 826,806 Initial Warrants and 351,586 Additional Warrants in exchange for previously issued convertible notes (including principal and accrued and unpaid interest) (the “Notes”) held by the directors or affiliated entities as follows: (i) 71,211 Units, 609,566 Initial Warrants and 259,208 Additional Warrants were issued to Edward B. Smith, III, the Company’s Chief Executive Officer, in exchange for an aggregate of $284,844 of notes, (ii) 10,084 Units, 86,317 Initial Warrants and 36,705 Additional Warrants were issued to Morris Garfinkle in exchange for $40,335 of notes; (iii) 5,211 Units, 44,606 Initial Warrants and 18,968 Additional Warrants were issued to each of Mark Hershhorn and Brian Israel in exchange for an aggregate of $20,844 of notes, respectively; and (v) 4,873 Units, 41,712 Initial Warrants and 17,737 Additional Warrants were issued to CKS Warehouse, an entity in which Mr. Hershhorn owns a controlling interest, in exchange for an aggregate of $19,491of principal and interest on notes. On February 9, 2015, the Company closed a second round of a private placement offering in which investors received the Initial Warrants to acquire 8.56 shares of the Common Stock at an exercise price of $0.64 per share all pursuant to separate securities purchase agreements entered into with each investor. In addition, the Company issued to each of the investors in the first and second rounds of financing an additional warrant for each Unit acquired (the “Additional Warrant” and together with the Initial Warrant, the “Warrants”) to acquire 3.64 shares of the Common Stock at an exercise price of $0.64 per share. The Initial Warrants issued in the second closing are exercisable for 1,070,000 shares of the Common Stock and the Additional Warrants issued in the second closing are exercisable for an aggregate of 455,000 shares of the Common Stock. The sale was part of a private placement offering (the “Offering”) in which the Company offered for sale a maximum of 5,000,000 units (gross proceeds of $20,000,000). Prior to the second closing, the Company raised gross proceeds of $1,040,000 in the initial closing of the Offering issued Initial Warrants to acquire 2,225,600 shares of common stock and Additional Warrants to acquire 946,400 shares of common stock. The Warrants expire on the fifth anniversary of their issuance, may be exercised on a cashless basis, are subject to full ratchet price anti-dilution protection and entitled to registration rights. The fair values for the Company’s derivative liabilities related to the Warrants issued is $67,108. The derivative instruments were valued as of September 30, 2016 with the following assumptions:
- The Holder would automatically exercise the warrants at a stock price above the exercise price, with the target exercise price dropping as expiration approaches,
- The projected annual volatility was based on the Company’s historical volatility,
- An event of default would occur 5% of the time, increasing by 0.10% per month,
- Dilutive/Full Reset events projected to occur based on future projected capital needs (capital funds raised were projected in prior quarters – future financings are projected going forward in 2016) resulting in the weighted conversion price dropping from the initial conversion price. Effective January 1, 2015 the Company entered into a Consulting Agreement with Jeffery Consulting Group, LLC pursuant to which Jeffery Consulting will provide assistance with operational improvements including manufacturing processes, strategic and tactical advice with respect to the Company’s sales and marketing initiatives, and provide customer introductions and strategic sales opportunities. In consideration of services rendered by Jeffery Consulting, the Company issued a warrant to purchase 1,250,000 shares of common stock at $0.35 per share. The warrant vested 500,000 shares upon the mutual execution of this agreement, and 250,000 shares each at the three month, six month, and nine month anniversaries of this agreement. The fair value of the warrants issued is estimated on the date of grant using the Black-Scholes valuation model. The assumptions used in the model included the historical volatility of the Company’s stock of 84.52%, and the risk-free rate for periods within the expected life of the warrant based on the U.S. Treasury yield curve in effect of 1.07%. For the three months ended September 30, 2015 the Company recognized compensation expense of $128,880. The Company also agreed to accrue $5,000 per month which becomes payable to Jeffery Consulting once the Company has raised $3 million in additional capital. The Company terminated the Consulting Agreement as of April 1, 2016. On February 9, 2015, Edward B. Smith, III and Morris Garfinkle were issued warrants exercisable for 31,000,000 and 5,500,000 shares of common stock, respectively, in consideration of the services to be provided to the Company as Chief Executive Officer of the Company and Chairman of the Board, respectively. The exercise price of these warrants is $0.45 per share. The fair value of the warrants issued is estimated on the date of grant using the Black-Scholes valuation model. The assumptions used in the model included the historical volatility of the Company’s stock of 81.99%, and the risk-free rate for periods within the expected life of the warrant based on the U.S. Treasury yield curve in effect of 0.85%. For the three months ended September 30, 2015 the Company recognized compensation expense of $3,749,259. On April 29, 2015, the Company sent a proposal to all warrant holders (as of September 30, 2014), which offered to participate in a warrant exchange program whereby each warrant holder was able to 1) exchange their warrants for common stock, on a cashless basis, at a reduced exercise price of $0.00005 per share, 2) if applicable, receive the right to 17.5% more warrants and a two year extension on all of their warrants in return for waiving their anti- dilution rights on a one- time basis for the exchange, or 3) elect to take advantage of (1) and (2) by (i) exchanging a portion of their Warrants that they so designate for shares of Common Stock in accordance with the applicable terms in (1) and (ii) the remainder of the Warrant not exchanged will be retained and amended pursuant to the applicable provisions of (2). As of April 29, 2015, there were 55,334,490 warrants outstanding that were eligible to participate in the proposal inclusive of 38,888,147 warrants associated with anti- dilution provisions resulting from the January 8, 2015 private placement. The results of this exchange were warrant holders elected to receive 52,110,896 shares of Common Stock under alternative (1). The Company recorded a loss on exchange of warrants in the amount of $12,959,654. Warrant holders elected to receive 318,750 additional warrants under alternative (2). Finally, warrant holders elected to receive a combination of 974,826 shares of Common Stock and 73,125 warrants under alternative (3). The Company recognized a warrant expense of $259,662. On May 14, 2015, the Company entered into a consulting agreement with E.B. Smith Jr. (father of the Company’s former Chief Executive Officer, director and largest shareholder, Edward B. Smith III) pursuant to which E.B. Smith Jr. agreed to provide advice with respect to the Company’s marketing initiatives, provide customer introductions and investigating strategic transactions. In consideration of services rendered by E.B. Smith Jr., the Company issued warrants to purchase 750,000 shares of common stock at $0.35 per share. The warrants vested 450,000 shares upon the mutual execution of the agreement and then in 150,000 share increments at the three month and six month anniversaries of this agreement. The fair value of the warrants issued is estimated on the date of grant using the Black- Scholes valuation model. The assumptions used in the model included the historical volatility of the Company’s stock of 104.65%, and the risk- free rate for periods within the expected life of the warrant based on the U.S. Treasury yield curve in effect of 1.6%. In 2015 the Company recognized an expense of $117,642. The agreement terminated on May 14, 2016. On May 14, 2015, the Company entered into a consulting agreement with Terme Bancorp pursuant to which Terme Bancorp agreed to provide advice with respect to the Company’s marketing initiatives, provide customer introductions and investigating strategic transactions. In consideration of services rendered by Terme Bancorp, the Company issued warrants to purchase 1,250,000 shares of Common Stock at $0.35 per share. The warrants vested 750,000 shares upon the mutual execution of this agreement and then in 250,000 share increments at the three month and six month anniversaries of this agreement. The fair value of the warrants issued is estimated on the date of grant using the Black- Scholes valuation model. The assumptions used in the model included the historical volatility of the Company’s stock of 104.65%, and the risk- free rate for periods within the expected life of the warrant based on the U.S. Treasury yield curve in effect of 1.60%. In 2015 the Company recognized an expense of $197,075. The agreement terminated on May 14, 2016. On October 2, 2015, the Company issued a warrant to acquire 250,000 shares of the Common Stock, at an exercise price of $0.64 per share to an accredited investor in conjunction with their $250,000 note investment. The Warrants expire on the fifth anniversary of their issuance, may be exercised on a cashless basis, are subject to full ratchet price anti- dilution protection and entitled to registration rights. On December 23, 2015, the Company issued a warrant to acquire 500,000 shares of the Common Stock, at an exercise price of $0.64 per share to Jonathan Kahn in conjunction with his $500,000 note investment. The Warrants expire on the fifth anniversary of their issuance, may be exercised on a cashless basis, are subject to full ratchet price anti- dilution protection and entitled to registration rights. On March 2 2016, the Company issued a warrant to acquire 400,000 shares of the Common Stock, at an exercise price of $0.64 per share to Jonathan Kahn in conjunction with his $100,000 note investment. The Warrants expire on the fifth anniversary of their issuance, may be exercised on a cashless basis, are subject to full ratchet price anti- dilution protection and entitled to registration rights. On March 11, 2016, the Company issued a warrant to acquire 400,000 shares of the Common Stock, at an exercise price of $0.64 per share to an accredited investor in conjunction with their $100,000 note investment. The Warrants expire on the fifth anniversary of their issuance, may be exercised on a cashless basis, are subject to full ratchet price anti- dilution protection and entitled to registration rights. On March 17, 2016, the Company issued a warrant to acquire 400,000 shares of the Common Stock, at an exercise price of $0.64 per share to an entity controlled by Morris Garfinkle in conjunction with its $100,000 note investment. The Warrants expire on the fifth anniversary of their issuance, may be exercised on a cashless basis, are subject to full ratchet price anti- dilution protection and entitled to registration rights. On March 17, 2016, the Company issued a warrant to acquire 200,000 shares of the Common Stock, at an exercise price of $0.64 per share to an entity controlled by Dan Jeffery in conjunction with its $50,000 note investment. The Warrants expire on the fifth anniversary of their issuance, may be exercised on a cashless basis, are subject to full ratchet price anti- dilution protection and entitled to registration rights. On April 7, 2016, the Company issued two warrants to acquire a total of 400,000 shares of the Common Stock, at an exercise price of $0.64 per share to two accredited investors in conjunction with their total of $100,000 note investments. The Warrants expire on the fifth anniversary of their issuance, may be exercised on a cashless basis, are subject to full ratchet price anti- dilution protection and entitled to registration rights. On April 8, 2016, the Company issued a warrant to acquire 2,000,000 shares of the Common Stock, at an exercise price of $0.64 per share to an accredited investor in conjunction with their $500,000 note investment. The Warrants expire on the fifth anniversary of their issuance, may be exercised on a cashless basis, are subject to full ratchet price anti- dilution protection and entitled to registration rights. On April 22, 2016, the Company purchased 4,610,178 warrants from their holders for an aggregate price of $122,805. On April 28, 2016, the Company issued a warrant to acquire 150,000 shares of the Common Stock, at an exercise price of $0.64 per share to an entity controlled by Dan Jeffery in conjunction with its $50,000 note investment. The Warrants expire on the fifth anniversary of their issuance, may be exercised on a cashless basis, are subject to full ratchet price anti- dilution protection and entitled to registration rights. On July 14, 2016, the Company issued a warrant to acquire 2,000,000 shares of the Common Stock, at an exercise price of $0.64 per share to an accredited investor in conjunction with their $500,000 note investment. The Warrants expire on the fifth anniversary of their issuance, may be exercised on a cashless basis, are subject to full ratchet price anti- dilution protection and entitled to registration rights. On July 21, 2016, the Company issued a warrant to acquire 600,000 shares of the Common Stock, at an exercise price of $0.64 per share to an accredited investor in conjunction with their $300,000 note investment. The Warrants expire on the fifth anniversary of their issuance, may be exercised on a cashless basis, are subject to full ratchet price anti- dilution protection and entitled to registration rights. There were no warrants exercised either for cash or on a cashless basis. |
