Quarterly report pursuant to Section 13 or 15(d)

Stock Based Compensation

v3.8.0.1
Stock Based Compensation
9 Months Ended
Sep. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
STOCK BASED COMPENSATION
7. STOCK BASED COMPENSATION

 

Options to directors, officers and employees

 

The Company maintains, as adopted by the board of directors, the 2014 Stock Incentive Plan, the 2014 Stock Compensation Plan, 2013 Incentive Stock Plan, the 2012 Incentive Stock Plan, the 2011 Incentive Stock Plan and the 2010 Stock Incentive Plan (the plans) providing for the issuance of up to 1,100,000 options to employees, officers, directors or consultants of the Company. Incentive stock options granted under the plans may only be granted with an exercise price of not less than fair market value of the Company’s common stock on the date of grant (110% of fair market value for incentive stock options granted to principal stockholders). Non-qualified stock options granted under the plans may only be granted with an exercise price of not less than 85% of the fair market value of the Company’s common stock on the date of grant. Awards under the plans may be either vested or unvested options. The unvested options vest ratably over two years for options with a five or three-year term and after one year for options with a two-year term.

 

The 2017 Incentive Plan was adopted by the Board of Directors and the shareholders of the Company. 5,000,000 shares of Common Stock have been reserved for issuance under the 2017 Incentive Plan. Under the Plan, options may be granted which are intended to qualify as Incentive Stock Options (“ISOs”) under Section 422 of the Internal Revenue Code of 1986 (the “Code”) or which are not (“Non-ISOs”) intended to qualify as Incentive Stock Options thereunder. The 2017 Incentive Plan is not a qualified deferred compensation plan under Section 409(a) of the Internal Revenue Code and is not subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”). The primary purpose of the 2017 Incentive Plan is to attract and retain the best available personnel for the Company in order to promote the success of the Company’s business and to facilitate the ownership of the Company’s stock by employees. The 2017 Incentive Plan is administered by a committee of the Board that is designated by the Board to administer the Plan, composed of not less than two members of the Board all of whom are disinterested persons, as contemplated by Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”). All questions of interpretation of the 2017 Incentive Plan are determined by the Committee, and its decisions are final and binding upon all participants. Under the 2017 Incentive Plan, options may be granted to key employees, officers, directors or consultants of the Company, as provided in the 2017 Incentive Plan.

 

In addition to the plans, the Company has granted, on various dates, stock options to directors, officers and employees to purchase common stock of the Company. The terms, exercise prices and vesting of these awards vary.

 

The following table summarizes option activity for directors, officers and employees:

 

            Outstanding Stock Options  
      Options Available for Grant     Number of Options     Weighted
Average
Exercise Price
per Option
    Weighted
Average Grant
Date Fair Value
 per Option
    Weighted
Average
Remaining
Exercise Term
in Months
 
  Balance December 31, 2015     757,471       1,980,434     $ 2.21     $ 1.46       49  
  Additional stock reserved     500,000       -     $ -     $ -       -  
  Granted     (794,500 )     794,500     $ 6.38     $ 2.82       58  
  Exercised     -       (138,113 )   $ 1.79     $ 0.49       -  
  Forfeited     -       -     $ -     $ -       -  
  Expired     492,500       (492,500 )   $ 3.83     $ 1.65       -  
  Balance December 31, 2016     955,471       2,144,321     $ 2.46     $ 1.53       43  
  Additional stock reserved     944,529       -     $ -     $ -       -  
  Granted     (1,900,000 )     1,900,000     $ 5.01     $ 1.11       72  
  Exercised     -       (137,419 )   $ 2.11     $ 1.00       -  
  Forfeited     -       -     $ -     $ -       -  
  Expired     -       -     $ -     $ -       -  
  Balance September 30, 2017     0       3,906,902     $ 3.17     $ 1.84       43  

 

The Company recorded $1,070,862 and $823,253 compensation expense for stock options to directors, officers and employees for the nine months ended September 30, 2017 and 2016 respectively. As of September 30, 2017, unrecognized compensation expense of $2,376,998 is related to non-vested options granted to directors, officers and employees which is anticipated to be recognized over the next 7 months, commensurate with the vesting schedules.

 

Options to consultants

 

The Company has also granted, on various dates, stock options to purchase common stock of the Company to consultants for services previously provided to the Company. The terms, exercise prices and vesting of these awards vary.

 

The following table summarizes option activity for consultants:

 

            Outstanding Stock Options  
      Options
Available for
Grant
    Number of
Options
    Weighted
Average
Exercise Price
per Option
    Weighted
Average Grant
Date Fair Value
per Option
    Weighted
Average
Remaining
Exercise Term in Months
 
  Balance December 31, 2015     99,303       306,773     $ 0.36     $ 1.01       41  
  Granted     (9,000 )     9,000     $ 4.99     $ 0.44       52  
  Exercised     -       (138,312 )   $ 0.34     $ 0.81       -  
  Balance December 31, 2016     90,303       177,461     $ 0.49     $ 1.05       37  
  Exercised     -       (5,000 )   $ 1.50     $ 0.83       -  
  Balance September 30, 2017     90,303       172,461     $ 0.57     $ 1.11       32  

 

The Company recorded $5,258 and $31,356 compensation expense for stock options to consultants for the nine months ended September 30, 2017 and 2016 respectively. As of September 30, 2017, there was no unrecognized compensation expense for options granted to consultants.

 

Warrants to placement agent and consultants

 

The Company has compensated the placement agents for assisting in the sale of the Company’s securities by paying the placement agent commissions and issuing the placement agent common stock purchase warrants to purchase shares of the Company’s common stock. The warrants have a five-year term and various exercise prices.

 

The Company has also granted, on various dates, stock warrants to purchase common stock of the Company to consultants for services previously provided to the Company. The terms, exercise prices and vesting of these awards vary.

 

The following table summarizes warrant activity for the placement agent and consultants: 

 

            Outstanding Warrants  
      Warrants
Available for
Grant
    Number of
Warrants
    Weighted
Average Exercise Price per Warrant
    Weighted
Average Grant
Date Fair Value
per Warrant
    Weighted
Average
Remaining
Exercise Term
in Months
 
  Balance December 31, 2015     210,227       306,823     $ 2.79     $ 1.26       9  
  Exercised     -       (60,160 )   $ 2.69     $ 0.43       -  
  Expired     -       (87,458 )   $ 6.00     $ 2.70       -  
  Balance December 31, 2016     210,227       159,205     $ 2.56     $ 1.16       17  
  Balance September 30, 2017     210,227       159,205     $ 1.38     $ 0.68       21  

 

The Company recorded no compensation expense for stock warrants to the placement agent and consultants for the nine months ended September 30, 2017 and 2016, respectively. There is no unrecognized compensation expense for the placement agent warrants because they are fully vested at date of grant. 

 

Warrants to directors and officers 

  

In December 2010 and May 2011, the Company issued to certain directors’ and officers’ common stock purchase warrants to acquire shares of common stock at an exercise price of $20.00 per share for a period of five years. In November 2011, under the terms of a Promissory Note issued to a director and officer, common stock purchase warrants were issued to acquire 100,000 shares of common stock at an exercise price of $5.00 per share for a period of one year. In May 2012, a director and officer received common stock purchase warrants to acquire common stock of the Company at an exercise price of $5.00 for a period of three years. In June 2012, a director and officer converted secured and unsecured loans provided to the Company from September 2011 to June 2012 in the aggregate amount of $389,250 into Promissory Notes and common stock purchase warrants. In November 2012, the Company entered into a Note and Warrant Amendment and Conversion Agreement whereby the holders converted all principal and interest under such Promissory Notes into shares of common stock. Further, the exercise price of the common stock purchase warrants was reduced to $2.50 per share. The $7,388 cost of the reduction in the exercise price is included in stock based compensation expense for the year ended December 31, 2012. 

 

The following table summarizes warrant activity for directors and officers: 

 

            Outstanding Warrants  
      Warrants Available for Grant     Number of Warrants     Weighted
Average
Exercise Price
per Warrant
    Weighted
Average Grant
Date Fair Value
 per Warrant
    Weighted
Average
Remaining
Exercise Term
in Months
 
  Balance December 31, 2015     348,925       338,925     $ 20.00     $ 1.02       4  
  Expired     -       (150,000 )     20.00       0.15       -  
  Balance December 31, 2016     348,925       188,925     $ 20.00     $ 1.02       4  
  Balance September 30, 2017     348,925       188,925     $ 20.00     $ 1.30       4  

  

The Company recorded no compensation expense for stock warrants to directors and officers for the nine months ended September 30, 2017 and 2016. There is no unrecognized compensation expense for these warrants because they are fully vested at date of grant.