Quarterly report pursuant to Section 13 or 15(d)

NOTE 7 - OPTIONS, RESTRICTED STOCK UNITS AND WARRANTS

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NOTE 7 - OPTIONS, RESTRICTED STOCK UNITS AND WARRANTS
9 Months Ended
Sep. 30, 2015
Disclosure Text Block Supplement [Abstract]  
Shareholders' Equity and Share-based Payments [Text Block]
NOTE 7 – OPTIONS, RESTRICTED STOCK UNITS AND WARRANTS

On October 19, 2012, the Company’s Board of Directors approved the 2012 Equity Incentive Plan (“the “2012 Plan) and terminated the Long-Term Incentive Plan (the “2011 Plan”). The 2012 Plan provides for the issuance of options to purchase up to 11,686,123 (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 2012 Plan the Company may issue Incentive Stock Options as defined by the Internal Revenue Code to employees of the Company only. The Board of Directors of the Company or a committee thereof administers the 2012 Plan and determines the exercise price, vesting and expiration period of the grants under the 2012 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 any other grantee. The fair value of the common stock is determined based on (i) if the common stock is listed on an established stock exchange or national market system, the arithmetic mean of the sales prices (or the closing bids, if no sales were reported) for the ten trading days immediately preceding the day of determination, (ii) if the common stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the mean between the high bid and low asked prices on the day of determination (or if none were reported on that date, on the last trading date such bids and asks were reported) or (iii) in the absence of an established market, by the administrator in good faith.

Additionally, the vesting period of the grants under the 2012 Plan will be determined by the administrator, in its sole discretion, with an expiration period of not more than ten years. The Company reserved 1,250,000 shares of its common stock for future issuance under the terms of the 2012 Plan.

During the nine months ended September 30, 2015, the Company granted an aggregate of 1,425,000 options to purchase the Company’s common stock to officers, directors and key consultants.

The following table presents information related to stock options at September 30, 2015:

Options Outstanding
   
Options Exercisable
 
           
Weighted
       
           
Average
   
Exercisable
 
Exercise
   
Number of
   
Remaining Life
   
Number of
 
Price
   
Options
   
In Years
   
Options
 
$
1.01-2.00
     
1,169,642
     
5.4
     
877,642
 
 
2.01-3.00
     
5,935,548
     
6.6
     
4,204,492
 
 
3.01-4.00
     
300,000
     
9.5
     
300,000
 
         
7,405,190
     
6.5
     
5,382,134
 

A summary of the stock option activity and related information for the 2012 Plan for the nine months ended September 30, 2015 is as follows:

               
Weighted-Average
       
         
Weighted-Average
   
Remaining
   
Aggregate
 
   
Shares
   
Exercise Price
   
Contractual Term
   
Intrinsic Value
 
Outstanding at January 1, 2015
   
5,990,190
   
$
2.25
     
6.7
     
3,267,692
 
Grants
   
1,425,000
     
2.70
     
10.0
     
-
 
Exercised
   
  (10,000
)
   
2.09
                 
Canceled
   
  -
                         
Outstanding at September 30, 2015
   
7,405,190
   
$
2.34
     
6.5
   
$
-
 
Exercisable at September  30, 2015
   
5,382,134
   
$
2.35
     
6.5
   
$
-
 

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 $1.40 as of September 30, 2015, 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 nine months ended September 30, 2015 was estimated using the Black-Scholes pricing model.

In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company’s forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the number of vested options as a percentage of total options outstanding.  

During the nine months ended September 30, 2015, the Company granted an aggregate of 1,425,000 options to purchase the Company’s common stock in connection with the services rendered at exercise prices from $1.74 to $3.99 per share for a term of seven years.  Vesting is as follows:

  450,000  
50% immediately, 50% at first year anniversary
  130,000  
1/4 per quarter, over one year
  65,000  
50%, immediately, 50% performance contingent
  300,000  
1/12 per month beginning first month anniversary
  480,000  
Exercisable immediately
  1,425,000    

The fair value of the granted options for the nine months ended September 30, 2015 was determined using the Black Scholes option pricing model with the following assumptions:

Dividend yield:
   
-0-
%
Volatility
 
118.56% to 130.30
%
Risk free rate:
 
1.19% to 2.37
%
Expected life:
 
7 to 10 years
 
Estimated fair value of the Company’s common stock
 
$
1.40 to $3.99
 
Estimated forfeiture rate
   
0
%

On April 22, 2015, the Company issued 10,000 shares of common stock in exchange for options exercised at $2.09 per share.

The fair value of all options vesting during the three and nine months ended September 30, 2015 of $836,425 and $3,793,152, respectively, and during the three and nine months ended September 30, 2014 of $1,543,162 and $2,099,501, respectively, was charged to current period operations.  Unrecognized compensation expense of $1,947,139 at September 30, 2015 will be expensed in future periods.

Restricted Stock

The following table summarizes the restricted stock activity for the nine months ended September 30, 2015:

Restricted shares issued as of January 1, 2015
   
-
 
Granted
   
175,000
 
Total restricted shares issued as of September 30, 2015
   
175,000
 
Vested restricted shares as of September 30, 2015
   
(-
)
Unvested restricted shares as of September 30, 2015
   
175,000
 

Stock based compensation expense related to restricted stock grants was $100,492 and $238,122 for the three and nine months ended September 30, 2015; $-0- for the three and nine months ended September 30, 2014.  As of September 30, 2015, the stock-based compensation relating to restricted stock of $153,878 remains unamortized.

Warrants

The following table summarizes information with respect to outstanding warrants to purchase common stock of the Company, all of which were exercisable, at September 30, 2015: 

Exercise
   
Number
   
Expiration
 
Price
   
Outstanding
   
Date
 
$
0.001
     
383,320
   
January 2020
 
$
1.50
     
3,940,057
   
February 2018 to September 2018
 
$
1.84
     
35,076
   
January 2020
 
$
2.00
     
100,000
   
August 2018
 
$
2.02
     
30,755
   
January 2020
 
$
2.50
     
100,000
   
August 2018
 
$
2.75
     
228,720
   
August 2019 to September 2019
 
$
3.67
     
214,193
   
December 2018 to January 2019
 
$
3.75
     
1,340,556
   
April 2019 to March 2020
 
         
6,372,677
       

On January 23, 2015, the Company issued an aggregate of 428,400 and 321,300 warrants to purchase the Company’s common stock at $2.50 and $3.75 per share, respectively, expiring on July 31, 2015 and March 31, 2020, respectively, in connection with the sale of the Company’s common stock.

On February 10, 2015, the Company issued an aggregate of 337,000 and 252,750 warrants to purchase the Company’s common stock at $2.50 and $3.75 per share, respectively, expiring on July 31, 2015 and March 31, 2020, respectively, in connection with the sale of the Company’s common stock.

On February 27, 2015, the Company issued an aggregate of 223,000 and 167,250 warrants to purchase the Company’s common stock at $2.50 and $3.75 per share, respectively, expiring on July 31, 2015 and March 31, 2020, respectively, in connection with the sale of the Company’s common stock.

On March 31, 2015, the Company issued an aggregate of 410,360 and 307,770 warrants to purchase the Company’s common stock at $2.50 and $3.75 per share, respectively, expiring on July 31, 2015 and March 31, 2020, respectively, in connection with the sale of the Company’s common stock.

On April 15, 2015, the Company issued 99,552 shares of common stock in exchange for 156,102 warrants exercised on a cashless basis.

On May 5, 2015, the Company issued 4,082 shares of common stock in exchange for 4,082 warrants exercised at $3.67 per share.

On May 8, 2015, the Company issued 4,000 shares of common stock in exchange for 4,000 warrants exercised at $2.50 per share.

On May 11, 2015, the Company issued an aggregate of 374,641 warrants to purchase the Company’s common stock at $1.50 per share expiring on May 11, 2020 in connection with the sale of the Company’s Series C Preferred stock.

On August 17, 2015, the Company issued 100,000 and 100,000 warrants to purchase the Company’s common stock at $2.00 and 2.50 per share, respectively, expiring on August 17, 2018 in connection with services provided.  Both warrants vest at 1/12 per month over one year.  The fair value of the vested portion of the issued warrants of $44,464 was charged to current period operations and was determined using the Black-Scholes option model with a volatility figure derived from an index of historical stock prices of comparable entities of 118.80%, risk free rate of 0.92%, dividend yield of -0- and fair value of the Company’s common stock of $1.40.

A summary of the warrant activity for the nine months ended September 30, 2015 is as follows:

               
Weighted-Average
       
         
Weighted-Average
   
Remaining
   
Aggregate
 
   
Shares
   
Exercise Price
   
Contractual Term
   
Intrinsic Value
 
Outstanding at January 1, 2015
   
5,113,990
   
$
1.71
     
3.6
     
6,041,436
 
Grants
   
3,022,471
     
2.79
     
2.2
     
-
 
Exercised
   
  (164,184
)
   
  1.58
                 
Canceled
   
  (1,599,600
 
$
  2.50
                 
Outstanding at September 30, 2015
   
6,372,677
   
$
2.03
     
3.0
   
$
536,265
 
                                 
Vested and expected to vest at September 30, 2015
   
6,372,677
   
$
2.03
     
2.8
   
$
536,265
 
Exercisable at September 30, 2015
   
6,189,345
   
$
2.02
     
2.8
   
$
536,265
 

The aggregate intrinsic value in the preceding tables represents the total pretax intrinsic value, based on warrants with an exercise price less than the Company’s stock price of $1.40 as of September 30, 2015, which would have been received by the warrant holders had those warrant holders exercised their warrants as of that date.