Quarterly report pursuant to Section 13 or 15(d)

NOTE 9 - OPTIONS, RESTRICTED STOCK UNITS AND WARRANTS

v3.19.1
NOTE 9 - OPTIONS, RESTRICTED STOCK UNITS AND WARRANTS
3 Months Ended
Mar. 31, 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 three months ended March 31, 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 March 31, 2019:


 

Options Outstanding

   

Options Exercisable

 
                 

Weighted

         
                 

Average

   

Exercisable

 
 

Exercise

   

Number of

   

Remaining Life

   

Number of

 
 

Price

   

Options

   

In Years

   

Options

 
  $ 2.51-5.00       1,663,218       8.1       1,163,218  
    5.01-7.500       2,157,610       4.3       1,759,294  
    7.51-10.00       120,000       6.0       120,000  
            3,940,828       6.0       3,042,512  

A summary of the stock option activity and related information for the 2012 Plan for the three months ended March 31, 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

    -                          

Canceled

    -                          

Outstanding at March 31, 2019

    3,940,828     $ 5.25       6.0     $ 4,162,880  

Exercisable at March 31, 2019

    3,042,512     $ 5.36       4.8     $ 3,020,099  

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 $6.14 as of March 31, 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 three months ended March 31, 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 three months ended March 31, 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  

The fair value of all options vesting during the three months ended March 31, 2019 and 2018 of $193,234 and $246,710, respectively, was charged to current period operations.  Unrecognized compensation expense of $3,472,040 and $173,446 at March 31, 2019 and December 31, 2018, respectively, will be expensed in future periods.


Restricted Stock


The following table summarizes the restricted stock activity for the three months ended March 31, 2019:


Total restricted shares issued as of December 31, 2018

    -  

Granted

    190,000  

Vested and issued

    (23,332

)

Vested restricted shares as of March 31, 2019

    -  

Unvested restricted shares as of March 31, 2019

    166,668  

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 $143,581 and $0 for the three months ended March 31, 2019 and 2018, respectively. As of March 31, 2019, the stock-based compensation relating to restricted stock of $1,063,717 remains unamortized. 


Warrants


The following table summarizes information with respect to outstanding warrants to purchase common stock of the Company at March 31, 2019: 


Exercise

   

Number

 

Expiration

Price

   

Outstanding

 

Date

$ 0.0025       153,328  

January 2020

$ 3.75       1,977,295  

April 2019 to August 2021

$ 4.375       633,272  

May 2021

$ 4.60       12,294  

January 2020

$ 4.875       352,943  

April 2019 to September 2019

$ 5.05       12,227  

January 2020

$ 6.85       217,958  

July 2021 to August 2021

$ 6.875       91,504  

August 2019 to September 2019

$ 9.375       536,267  

April 2019 to March 2020

          3,987,088    

A summary of the warrant activity for the three months ended March 31, 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

    (508,463

)

  $ 3.81                  

Expired

    (83,960

)

  $ 6.61       -       -  

Outstanding at March 31, 2019

    3,987,088     $ 4.81       1.2     $ 7,263,244  
                                 

Vested and expected to vest at March 31, 2019

    3,987,088     $ 4.81       1.2     $ 7,263,244  

Exercisable at March 31, 2019

    3,987,088     $ 4.81       1.2     $ 7,263,244  

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 $6.14 of March 31, 2019, which would have been received by the option holders had those option holders exercised their options as of that date.