Quarterly report pursuant to Section 13 or 15(d)

NOTE 9 - OPTIONS, RESTRICTED STOCK UNITS AND WARRANTS

v3.19.2
NOTE 9 - OPTIONS, RESTRICTED STOCK UNITS AND WARRANTS
6 Months Ended
Jun. 30, 2019
Disclosure Text Block Supplement [Abstract]  
Shareholders' Equity and Share-based Payments [Text Block]

NOTE 9 – OPTIONS, RESTRICTED STOCK UNITS AND WARRANTS


Options


On October 19, 2012, the Company’s Board of Directors approved the 2012 Equity Incentive Plan (“the “Plan) and terminated the Long-Term Incentive Plan (the “2011 Plan”). The Plan provides for the issuance of options to purchase up to 15,186,123 (as amended) shares of the Company’s common stock to officers, directors, employees and consultants of the Company (as amended). Under the terms of the Plan the Company may issue Incentive Stock Options as defined by the Internal Revenue Code to employees of the Company only and nonstatutory options. The Board of Directors of the Company or a committee thereof administers the Plan and determines the exercise price, vesting and expiration period of the grants under the Plan.


However, the exercise price of an Incentive Stock Option should not be less than 110% of fair value of the common stock at the date of the grant for a 10% or more stockholder and 100% of fair value for a grantee who is not 10% stockholder. The fair value of the common stock is determined based on the quoted market price or in absence of such quoted market price, by the administrator in good faith.


Additionally, the vesting period of the grants under the Plan will be determined by the administrator, in its sole discretion, with an expiration period of not more than ten years. The Company reserved 910,346 shares of its common stock for future issuance under the terms of the Plan.


During the six months ended June 30, 2019, the Company granted an aggregate of 805,000 options to officers, directors and key consultants.


The following table presents information related to stock options at June 30, 2019:


 

Options Outstanding

 

 

Options Exercisable

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

Exercisable

 

 

Exercise

 

 

Number of

 

 

Remaining Life

 

 

Number of

 

 

Price

 

 

Options

 

 

In Years

 

 

Options

 

 

$

2.51-5.00

 

 

 

1,538,361

 

 

 

8.2

 

 

 

1,076,699

 

 

 

5.01-7.500

 

 

 

1,904,544

 

 

 

3.3

 

 

 

1,670,812

 

 

 

7.51-10.00

 

 

 

120,000

 

 

 

5.8

 

 

 

120,000

 

 

 

 

 

 

 

3,562,905

 

 

 

5.5

 

 

 

2,867,511

 


A summary of the stock option activity and related information for the 2012 Plan for the six months ended June 30, 2019 is as follows:


 

 

 

 

 

 

 

 

 

 

Weighted-Average

 

 

 

 

 

 

 

 

 

 

 

Weighted-Average

 

 

Remaining

 

 

Aggregate

 

 

 

Shares

 

 

Exercise Price

 

 

Contractual Term

 

 

Intrinsic Value

 

Outstanding at December 31, 2018

 

 

3,135,828

 

 

$

5.34

 

 

 

5.2

 

 

$

311,545

 

Grants

 

 

805,000

 

 

 

4.90

 

 

 

10.0

 

 

$

-

 

Exercised

 

 

(223,923

 

$

4.91

 

 

 

2.38

 

 

 

 

 

Forfeited/expired

 

 

(154,000

)

 

5.65

 

 

 

 

 

 

 

 

 

Outstanding at June 30, 2019

 

 

3,562,905

 

 

$

5.25

 

 

 

5.49

 

 

$

14,810,188

 

Exercisable at June 30, 2019

 

 

3,562,905

 

 

$

5.38

 

 

 

4.52

 

 

$

11,555,767

 


The aggregate intrinsic value in the preceding tables represents the total pretax intrinsic value, based on options with an exercise price less than the Company’s stock price of $9.39 as of June 30, 2019, which would have been received by the option holders had those option holders exercised their options as of that date.


Option valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived from an index of historical stock prices of comparable entities until sufficient data exists to estimate the volatility using the Company’s own historical stock prices. Management determined this assumption to be a more accurate indicator of value. The Company accounts for the expected life of options based on the contractual life of options for non-employees.


For employees, the Company accounts for the expected life of options in accordance with the “simplified” method, which is used for “plain-vanilla” options, as defined in the accounting standards codification. The risk-free interest rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the options.  The fair value of stock-based payment awards during the six months ended June 30, 2019 was estimated using the Black-Scholes pricing model.


On January 22, 2019, the Company granted an aggregate of 460,000 options to purchase the Company stock in connection with the services rendered at the exercise price of $4.33 per share for a term of ten years with vesting quarterly beginning April 1, 2019 over 3 years


On March 14, 2019, the Company granted an aggregate of 345,000 options to purchase the Company stock in connection with the services rendered at the exercise price of $5.66 per share for a term of ten years with 150,000 options vesting at anniversary date beginning March 14, 2020 over 3 years, 175,000 options vesting quarterly beginning June 14, 2019 over 3 years and 20,000 options vesting at one year anniversary.


The following assumptions were used in determining the fair value of options during the six months ended June 30, 2019:


Risk-free interest rate

 

 

2.53% - 2.74

%

Dividend yield

 

 

0

%

Stock price volatility

 

 

90.73% to 91.55

%

Expected life

 

6 – 10 years

 

Weighted average grant date fair value

 

$

4.244

 


On May 17, 2019, in connection with the retirement of two members of the Company’s board of directors, the Company extended the life of 628,905 previously issued director options from the contractual 90 days from termination of service to the earlier of the initial life up or May 17, 2021. The change in estimated fair value of the modified options of $666,062 was charged to current period operations


The following assumptions were used in determining the change in fair value of the modified options at May 17, 2019:


Risk-free interest rate

 

 

2.33% - 2.40

%

Dividend yield

 

 

0

%

Stock price volatility

 

 

89.97%

%

Expected life

 

0.12– 2 years

 


The fair value of all options vesting during the three and six months ended June 30, 2019 of $306,210 and $499,444, and $1,167,313 and $1,414,021 for the three and six months ended June 30, 2018, respectively, was charged to current period operations.  Unrecognized compensation expense of $2,508,085 and $173,446 at June 30, 2019 and December 31, 2018, respectively, will be expensed in future periods.


Restricted Stock


The following table summarizes the restricted stock activity for the six months ended June 30, 2019:


Total restricted shares issued as of December 31, 2018

    -  

Granted

    190,000  

Vested and issued

    (53,332

)

Vested restricted shares as of June 30, 2019

    -  

Unvested restricted shares as of June 30, 2019

    136,668  

On February 28, 2019, the Company granted an aggregate of 70,000 restricted stock grants for services with 23,332 vested immediately; 23,334 vesting at one year anniversary and 23,334 vesting at two year anniversary.


On March 20, 2019, the Company granted an aggregate of 120,000 restricted stock grants for services vesting quarterly beginning on April 1, 2019 over one year.


Stock based compensation expense related to restricted stock grants was $477,239 and $620,820 for the three and six months ended June 30, 2019, and $0 for the three and six months ended June 30, 2019, respectively. As of June 30, 2019, the stock-based compensation relating to restricted stock of $586,478 remains unamortized. 


Warrants


The following table summarizes information with respect to outstanding warrants to purchase common stock of the Company at June 30, 2019: 


Exercise

 

 

Number

 

Expiration

Price

 

 

Outstanding

 

Date

$

0.0025

 

 

 

153,328

 

January 2020

$

3.75

 

 

 

1,355,200

 

October 2019 to August 2021

$

4.375

 

 

 

618,272

 

April 2021 to May 2021

$

4.60

 

 

 

9,385

 

January 2020

$

4.875

 

 

 

67,006

 

August 2019 to September 2019

$

5.05

 

 

 

9,556

 

January 2020

$

6.85

 

 

 

209,377

 

July 2021 to August 2021

$

6.875

 

 

 

89,240

 

August 2019 to September 2019

$

9.375

 

 

 

481,108

 

March 2020

 

 

 

 

 

2,992,472

 

 


A summary of the warrant activity for the six months ended June 30, 2019 is as follows:


 

 

 

 

 

 

 

 

 

 

Weighted-Average

 

 

 

 

 

 

 

 

 

 

 

Weighted-Average

 

 

Remaining

 

 

Aggregate

 

 

 

Shares

 

 

Exercise Price

 

 

Contractual Term

 

 

Intrinsic Value

 

Outstanding at December 31, 2018

 

 

4,579,511

 

 

$

4.73

 

 

 

1.5

 

 

$

1,924,388

 

Grants

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

(1,433,285

)

 

$

4.02

 

 

 

 

 

 

 

 

 

Expired

 

 

(153,754

)

 

$

7.43

 

 

 

-

 

 

 

-

 

Outstanding at June 30, 2019

 

 

2,992,472

 

 

$

4.93

 

 

 

1.1

 

 

$

13,335,761

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vested and expected to vest at June 30, 2019

 

 

2,992,472

 

 

$

4.93

 

 

 

1.1

 

 

$

13,335,761

 

Exercisable at June 30, 2019

 

 

2,992,472

 

 

$

4.93

 

 

 

1.1

 

 

$

13,335,761

 


The aggregate intrinsic value in the preceding tables represents the total pretax intrinsic value, based on options with an exercise price less than the Company’s stock price of $9.39 of June 30, 2019, which would have been received by the option holders had those option holders exercised their options as of that date.