Quarterly report pursuant to Section 13 or 15(d)

Stock Options and Warrants

v3.5.0.2
Stock Options and Warrants
9 Months Ended
Sep. 30, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock Options and Warrants

Note 8 – Stock Options and Warrants

 

Options

 

During the nine months ended September 30, 2016 and 2015, the Company recorded compensation costs of $35,777 and $25,571 in general and administrative expense, respectively, relating to the vesting of stock options. As of September 30, 2016, the aggregate value of unvested options was $53,939, which will continue to be amortized as compensation cost as the options vest over terms ranging from one to three years, as applicable.

 

The stock option activity for the nine months ended September 30, 2016 is as follows:

 

    Number of Options     Weighted Average
Exercise Price
    Weighted Average
Remaining Contractual
Term
 
Balance outstanding, December 31, 2015     970,000     $ 0.17       6.71  
Granted     -       -       -  
Exercised     -       -       -  
Forfeited/expired     (63,334)     $ 0.25       -  
Balance outstanding, September 30, 2016     906,666     $ 0.17       5.15  
Exercisable, September 30, 2016     113,330     $ 0.25       8.27  

 

At September 30, 2016, the Company’s outstanding and exercisable options had no intrinsic value.

 

Warrants

 

During the nine months ended September 30, 2016, the Company issued warrants exercisable into 10,000,000 shares of common stock to accredited investors (see Note 6). In addition, the Company issued warrants to purchase 8,000,000 shares of common stock with an exercise price of $0.15 per share for services. The fair value of the 8,000,000 warrants issued for services was determined to be $330,210. The Company recorded $330,210 in general and administrative expense since it determined that the award is a certainty and the service performance and its future benefit are not assured in this arrangement. In addition, during the nine months ended September 30, 2016 and 2015, the Company recorded compensation costs of $120,973 and $138,624 in general and administrative expense, respectively, relating to the vesting of other stock warrants.

 

For the nine months ending September 30, 2016 and 2015, the fair value of warrant awards was estimated using the Black-Scholes-Merton option-pricing model with the following assumptions:

 

    September 30, 2016     September 30, 2015  
Expected volatility     121 %     254 %
Risk-free interest rate     1.08 %     1.5 %
Expected dividend yield     0 %     0 %
Expected life     3 years       5 years  

 

The risk-free interest rate was based on rates established by the Federal Reserve Bank. The expected life of the exercise feature of the warrants was based on the remaining term of the warrants. The expected dividend yield was based on the fact that the Company has not customarily paid dividends in the past and does not expect to pay dividends in the future.

 

As of September 30, 2016, the aggregate value of unvested warrants was $294,458, which will continue to be amortized as compensation cost as the warrants vest over two years.

 

A summary of the Company’s warrant activity during the nine months ended September 30, 2016 is presented below:

 

    Number of Warrants     Weighted Average
Exercise Price
    Weighted Average
Remaining Contractual
Term
 
Balance outstanding, December 31, 2015     35,310,140     $ 0.09       3.21  
Granted     18,500,000       0.12       2.41  
Exercised     (6,580,000 )     0.01       2,98  
Forfeited/expired     (181,250 )     0.09       -  
Balance outstanding, September 30, 2016     47,048,890     $ 0.11       2.38  
Exercisable, September 30, 2016     46,048,890     $ 0.11       4,73  

 

At September 30, 2016, the Company’s outstanding and exercisable warrants had an intrinsic value of $401,106.