Stock Option Plans | NOTE 12 – 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 Weighted Aggregate 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 (58,336 ) Granted - Exercised - Forfeited - Outstanding September 30, 2019 40,438,425 $ 0.40 3.77 $ 149,089 Exercisable September 30, 2019 38,130,093 $ 0.41 3.48 $ 149,089 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, 2019, based on a valuation of the Company’s stock for that day. A summary of the Company’s non-vested options for the nine-months ended September 30, 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 (972,914 ) Canceled (58,336 ) Non-vested at September 30, 2019 2,308,332 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 Year ended Dividend yield 0.0 % 0.0 % Risk-free rate 2.38% - 3.04 % 2.38% - 3.04 % Volatility 214% - 226 % 214% - 226 % Expected term 3 - 7 years 3 - 7 years 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. 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: Nine-months ended September 30 2019 2018 Amount Amount Service provider compensation $ 133,125 $ 76,250 Employee compensation 124,750 156,875 Total $ 257,875 $ 233,125 | 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 may 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, which was subsequently increased in December 2018 by an additional 5 million shares to allow for a total of 50,420,148 shares available 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 Weighted Aggregate 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 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 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, 2018, 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, 2018 and 2017 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 2,833,334 Vested (1,143,752 ) Canceled (350,000 ) Non-vested at December 31, 2018 3,339,582 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 years ended December 31: 2018 2017 Dividend yield 0.0 % 0.0 % Risk-free rate 2.38% - 3.04 % 1.89% - 2.26 % Expected volatility 214% - 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 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. 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. The Company recognized stock-based compensation expense related to options during the: Years ended December 31 2018 2017 Amount Amount Service provider compensation $ 124,896 $ 3,500 Employee compensation 205,250 33,271 Director compensation - 25,000 Total $ 330,146 $ 61,771 |