Stock Options Disclosure | 3 Months Ended |
Sep. 30, 2014 |
Notes | ' |
Stock Options Disclosure | ' |
NOTE 14. STOCK OPTIONS |
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On February 27, 2013, the Board of Directors of the Company ratified, approved, and adopted a Stock Option Plan for the Company allowing for the grant of up to 2,600,000 options to acquire common shares with terms of up to 5 years. The Board has the authority to determine the rate at which options vest. Each option must be exercised within 3 years commencing upon the option’s last date of vesting. Each option granted under the plan automatically terminates and may no longer be exercised if the optionee ceases for any reason to be an employee of, or consultant to, the Company, subject to certain exceptions in the event of death and disability. If options granted under the 2013 Stock Option Plan expire or are cancelled, new options may thereafter be granted covering such shares. In the event the Company commences an initial public offering, sells substantially all of its assets, or sells at least 75% of its common stock in a single transaction (a “Change in Control Event”), then the option shall immediately vest and become exercisable in its entirety. The 2013 Stock Option Plan terminates and no further options can be granted thereunder on February 28, 2018. |
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During the year ended December 31, 2013, the Company granted a total of 1,600,000 stock options as part of the Company’s 2013 Stock Option Plan. The total fair value of 1,100,000 of these options at the grant date was estimated to be $357,860 and was determined using the Black- Scholes option pricing model with an expected life of 5 years, a range of risk free interest rate from 0.40% to 1.75%, a dividend yield of 0%, and expected volatility of 122.20%. |
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On December 4, 2013, the Company granted 500,000 stock options to a consultant under the 2013 Stock Option Plan at $0.40 per option for a term of 3 years. The Option shall vest in six equal parts at the end of each fiscal quarter beginning on December 31, 2013, and with the final portion of the option vesting on March 31, 2015. The total fair value of these options at the date of grant was estimated at $219,550 and determined using the Black-Scholes option pricing model with the following assumptions; a term of 3 years, a risk free interest rate of 1.75%, a dividend yield of 0%, and an expected volatility of 120.71%. As of December 31, 2013, $36,592 was recorded as a stock-based compensation expense for the portion vested as of December 31, 2013. |
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However, under the terms of the 2013 Stock Option Plan, the option terminates and may no longer be exercised by the consultant if the consultant ceases to be a consultant to the Company. On December 31, 2013, the consultant was terminated from the Company as the consultant ceased to provide consulting services to the Company. The consultant had thirty (30) days from the date of termination to exercise the option. On January 31, 2014, the option expired, and the consultant did not exercise the option within the requisite timeframe. Thus, this option was cancelled by the Company. |
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During fiscal year 2013, terms of non-qualified stock options held by certain optionees were amended so that they vested immediately. Upon amendment, 320,000 of a possible 350,000 options to acquire common shares were exercised for a total of $80,000. |
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On April 25, 2014, the Company granted 500,000 stock options to a consultant under the 2013 Stock Option Plan at $0.25 per option for a term of 3 years. The options shall vest in two equal parts beginning March 10, 2015, and with the final portion of the option vesting on March 10, 2016. However, these 500,000 options were cancelled by the Company on June 13, 2014, effective July 13, 2014. The Company provided a written termination notice to the consultant consistent with the terms of the consulting agreement between the parties. |
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The Company granted and cancelled 500,000 options during the nine months ended September 30, 2014. No options were exercised during that period. |
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Officer and Director Option Grants |
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On July 18, 2014 the board approved the following grants at the exercise price at $0.15 per option: Jamie Dingman, former President, CEO, and Chairman had 25% of his options vest (625,000) prior to him leaving the role. Mr Dingman has three months from that date to exercise these options. The remaining options did not vest and were therefore cancelled. The total fair value of these vested options at the date of grant, July 18, 2014, was estimated at $121,187, determined using the Black-Scholes option pricing model with the following assumptions; a term of 3 years, a risk free interest rate of 0.97% a dividend yield of 0%, and an expected volatility of 155.85%. |
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Brett Maloley received 2,000,000 options for a term of 20 months (1.67 years). Of these options, 25% (500,000) became exercisable on July 18, 2014. Another 25% of shares (500,000) shall vest and become exercisable on December 31, 2014. The remaining shares (1,000,000) shall vest and become exercisable in equal monthly installments over the next 12 months. The total fair value of these options at the date of grant, July 18, 2014, was estimated at $292,162 and determined using the Black-Scholes option pricing model with the following assumptions; a term of 1.67 years, a risk free interest rate of .51%, a dividend yield of 0%, and an expected volatility of 155.85%. |
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Tom Sullivan received two pools of options both at 250,000 options per pool for a total of 500,000 stock options. The first pool of options is time based for a term of 3 years. Under the time based option, 20% of the shares (50,000) become exercisable on July 18, 2014. Another 20% of shares (50,000) shall vest and become exercisable on January 1, 2015. The remaining shares (150,000) shall vest and become exercisable in equal monthly installments over the next 12 months. The second pool of options is performance based. Under the performance based option, the option will vest when performance based measures are met over a term of 5 years. The total fair value of these options at the date of grant, July 18, 2014, was estimated at $89,044 and determined using the Black-Scholes option pricing model with the following assumptions; a term of 3 & 5 years, a risk free interest rate of 0.97%, a dividend yield of 0%, and an expected volatility of 155.85%. |
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Zach Allia resigned on July 28, 2014, as Chief Technology Officer and member of the Board of Directors. Prior to his resignation, 25% of the shares underlying his options (i.e., 625,000 shares) vested and became exercisable. Pursuant to the Company’s 2014 Option Plan, Mr. Allia had two months from his resignation to exercise his option to the extent vested. Mr. Allia did not exercise his option, or any portion thereof, within this two month period. Accordingly, Mr. Allia’s option has been cancelled in its entirety consistent with the Company’s 2014 Option Plan. |
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The exercise price for the stock options specified in the four agreements aforementioned was unknown at the date of the agreements. These stock options were formally granted on July 18, 2014, when the board approved the exercise price at $0.15 per option. Accordingly, stock-based compensation expense of $145,385 was recorded as of September 30, 2014. |
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The Company’s stock option activity for the nine months ended September 30, 2014 is summarized as follows: |
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. | Number of | Weighted average | Weighted average |
Options | exercise | remaining |
| Price per share | contractual life (in years) |
Balance, December 31, 2013 | 530,000 | $0.39 | 4.25 |
Granted | 8,500,000 | 0.16 | 0.92 |
Exercised | -- | -- | -- |
Expired / Cancelled | -4,750,000 | $0.19 | 2.32 |
Balance, September 30, 2014 | 4,280,000 | $0.15 | 0.92 |
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Warrants |
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On September 22, 2011, the Company issued 300,000 warrants for services valued at $53,160. Each warrant is convertible into one share of common stock at an exercise price of $0.45. All warrants are fully vested and are exercisable at any time up to and including January 1, 2015. The fair value of these warrants was estimated at the grant date using Black-Scholes Option Pricing Model with current value of the stock at $0.37; dividend yield of 0%; risk-free interest rate of 0.34% (3 year Treasury note rate at the issue date); volatility rate of 78.94%; and expiration date of 3.25 years. As of September 30, 2013, no warrants have been exercised. |
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During fiscal year 2013, the Company granted 6,000,000 warrants in conjunction with the sales of the equity units. Each warrant entitles the holder to purchase one share of the Company’s common stock at a price of $0.25 per share for a period of three years from the date of issuance. 2,870,000 warrants were exercised during fiscal year 2013. |
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During the nine months ended September 30, 2014, no warrants were exercised, granted, or cancelled. |
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| Number of | Weighted average | Weighted average |
Warrants | exercise | remaining |
| Price per share | contractual life (in years) |
Balance, December 31, 2013 | 3,430,000 | $0.27 | 2.04 |
Granted | -- | -- | -- |
Exercised | -- | -- | -- |
Expired / cancelled | -- | -- | -- |
Balance, September 30, 2014 | 3,430,000 | $0.27 | 1.3 |
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