Quarterly report pursuant to Section 13 or 15(d)

STOCK-BASED COMPENSATION

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STOCK-BASED COMPENSATION
 6 Months Ended
Jun. 30, 2018
Notes to Financial Statements  
NOTE 12 - STOCK-BASED COMPENSATION

2016 Equity Incentive Plan

 

In the first quarter of 2016, the Company adopted the 2016 Equity Incentive Plan. The following table contains information about the 2016 Equity Incentive Plan as of June 30, 2018:

 

    Awards Reserved for Issuance     Awards Issued     Awards Available for Grant  
                   
2016 Equity Incentive Plan     30,000,000       2,044,399       27,955,601  
                         

 

Stock Options

 

The following table summarizes the Company’s stock option activity and related information for the three and six months ended June 30, 2018:

 

    Number of Shares      Weighted-Average Exercise Price Per Share      Weighted-Average Remaining Contractual Life    Aggregate Intrinsic Value of In-the-Money Options   
       
                       
Options Outstanding as of Janury 1, 2018     1,177,732     $ 2.17            
                           
Options Granted     800,000     $ 4.41            
Options Exercised     -       -            
Options Forfeited     -       -            
Options Expired     -       -            
Options Outstanding as of March 31, 2018     1,977,732     $ 3.08      9.1 Years    $ 522,600  
Options Exercisable as of Mach 31, 2018     659,774     $ 2.20      8.5 Years    $ 391,950  
                             
Options Granted     66,667     $ 3.75              
Options Exercised     -       -              
Options Forfeited     -       -              
Options Expired     -       -              
Options Outstanding as of June 30, 2018     2,044,399     $ 3.10      8.89 Years    $ 361,800  
Options Exercisable as of June 30, 2018     828,941     $ 2.38      8.42 Years    $ 301,500  

   

The aggregate intrinsic value is calculated as the difference between the Company’s closing stock price of $2.16 on June 30, 2018 and the exercise price of options, multiplied by the number of options. As of June 30, 2018, there was $3,984,837 total unrecognized stock-based compensation. Such costs are expected to be recognized over a weighted-average period of approximately 1.74 years.

 

The Company recognizes compensation expense for stock option awards on a straight-line basis over the applicable service period of the award. The service period is generally the vesting period. The following assumptions were used to calculate stock-based compensation for issuances during the six months ended June 30, 2018.

 

    June 2018  
Expected Term (years)   6.5 Years  
Volatility   126.93-128.0%  
Risk-Free Interest Rate   2.5-2.8%  
Dividend Yield     0%  
         

 

The Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. Hence, the Company uses the “simplified method” described in Staff Accounting Bulletin 107 to estimate the expected term of share option grants.

 

The expected stock price volatility assumption was determined by examining the historical volatilities for the Company’s common stock. The Company will continue to analyze the historical stock price volatility and expected term assumptions as more historical data for the Company’s common stock becomes available.

 

The risk-free interest rate assumption is based on the U.S. treasury instruments whose term was consistent with the expected term of the Company’s stock options.

 

The expected dividend assumption is based on the Company’s history and expectation of dividend payouts. The Company has never paid dividends on its common stock and does not anticipate paying dividends on its common stock in the foreseeable future. Accordingly, the Company has assumed no dividend yield for purposes of estimating the fair value of the Company stock-based compensation.

 

The Company estimates the forfeiture rate at the time of grant and revisions, if necessary, were estimated based on management’s expectation through industry knowledge and historical data.

 

Stock-Based Compensation Expense

 

The following table sets forth the total stock-based compensation expense resulting from stock options and restricted grants of common stock to employees, directors and non-employee consultants in the consolidated statement of operations which are included in selling, general and administrative expenses:

 

    For the Three Months Ended  
    June 30, 2018     June 30, 2017  
Type of Award    Number of Shares or Options Granted     Stock-Based Compensation Expense      Number of Shares or Options Granted     Stock-Based Compensation Expense   
                           
Stock Options     66,667     $ 480,500       550,000     $ 157,430  
                                 
Stock Grants:                                
Employees (Common Stock)     91,888       264,542       102,385       294,632  
Employees (Series B Preferred Stock)     -       -       -       -  
Directors (Common Stock)     -       -       72,728       184,473  
Non–Employee Consultants (Common Stock)     37,872       107,037       159,424       446,348  
                                 
Total Stock–Based Compensation Expense           $ 852,079             $ 1,082,883  

  

    For the Six Months Ended  
    June 30, 2018     June 30, 2017  
Type of Award    Number of Shares or Options Granted     Stock-Based Compensation Expense      Number of Shares or Options Granted     Stock-Based Compensation Expense   
                           
Stock Options     866,667     $ 954,698       550,000     $ 205,019  
                                 
Stock Grants:                                
Employees (Common Stock)     173,394       552,992       109,052       320,732  
Employees (Series B Preferred Stock)     -       -       40,000       1,035,406  
Directors (Common Stock)     -       -       81,061       221,973  
Non–Employee Consultants (Common Stock)     44,282       123,727       190,600       591,359  
                                 
Total Stock–Based Compensation Expense           $ 1,631,417             $ 2,374,489