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8. Stock Options and Warrants

12 Months Ended

Dec. 31, 2019

Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]

8.	Stock Options and Warrants

The Company periodically issues stock options and warrants to employees and non-employees in capital raising transactions, for services and for financing costs. Options and warrants vest and expire according to terms established at the grant date.

Options

Employee options vest according to the terms of the specific grant and expire from 5 to 10 years from date of grant. The weighted average, remaining contractual life of employee and non-employee options outstanding at December 31, 2019 was 4.7 years. Stock option activity for the period January 1, 2018 to December 31, 2019, was as follows:

	Options			Weighted Avg. Exercise Price
Options outstanding, January 1, 2018		35,397,675		$	0.23
Options granted		2,083,335			0.18
Options exercised		(179,710	)		0.07
Options cancelled		(2,000,000	)		0.28
Options outstanding, December 31, 2018		35,301,300		$	0.22
Options granted		4,987,500			0.08
Options exercised		(538,197	)		0.13
Options cancelled		–			–
Options outstanding, December 31, 2019		39,750,603		$	0.20

The weighted average exercise prices, remaining contractual lives for options granted, exercisable, and expected to vest as of December 31, 2019 were as follows:

	Outstanding Options						Exercisable Options
Option Exercise Price Per Share	Shares		Life (Years)		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
$ 0.05 - $ 0.24		18,215,553		7.6	$	0.10		18,115,553	$	0.10
$ 0.25 - $ 0.49		20,913,552		2.3		0.27		20,913,552		0.27
$ 0.50 - $ 0.99		471,052		4.3		0.85		471,052		0.85
$ 1.00 - $ 2.00		150,446		3.6		1.18		150,446		1.18
		39,750,603		4.7	$	0.20		39,650,603	$	0.20

As of December 31, 2019, the market price of the Company’s stock was $0.16 per share. At December 31, 2019 the aggregate intrinsic value of the options outstanding was $1,234,000. Future unamortized compensation expense on the unvested outstanding options at December 31, 2019 is approximately $22,000.

Year Ending December 31, 2019

In January 2019, the Company issued options to purchase a total of 4,987,500 shares of common stock to employees, officers and members of the Board of Directors with a fair value of $359,000 using the Black-Scholes Option Pricing model. The options are exercisable at $0.08 to $0.12 per share, vesting over 3 to 12 months and expiring ten years from the date of grant.

During the year ended December 31, 2019, the Company recognized compensation costs of $359,000 based on options that vested.

Year Ending December 31, 2018

In January 2018, the Company issued options to purchase a total of 2,083,335 shares of common stock to employees, officers and members of the Board of Directors with a fair value of $313,000 using the Black-Scholes Option Pricing model. The options are exercisable from $0.18 per share, vesting within year and expiring in ten years from the date of grant.

During the year ended December 31, 2018, the Company recognized compensation costs of $435,000 based on options that vested.

Black-Scholes Option Pricing

The Company used the following average assumptions in its calculation using the Black-Scholes Option Pricing model:

	Years Ended
	2019		2018
Expected life (years)		5.0		5.5
Risk free interest rate		2.4%		1.70%
Volatility		123%		118%
Expected dividend yield		0%		0%

The assumptions used in the Black Scholes models referred to above are based upon the following data: (1) the contractual life of the underlying non-employee options is the expected life. The expected life of the employee option is estimated by considering the contractual term of the option, the vesting period of the option and the employees’ expected exercise behavior. (2) The expected stock price volatility was based upon the Company’s historical stock price over the expected term of the option. (3) The risk-free interest rate is based on published U.S. Treasury Department interest rates for the expected terms of the underlying options. (4) The expected dividend yield was based on the fact that the Company has not paid dividends to common shareholders in the past and does not expect to pay dividends to common shareholders in the future.

Warrants

The following table summarizes certain information about the Company’s stock purchase warrants.

	Warrants			Weighted Avg. Exercise Price
Warrants outstanding, January 1, 2018		17,622,437			0.09
Warrants granted		18,238,688			0.05
Warrants exercised		(12,517,773	)		0.05
Warrants cancelled		(2,287,997	)		0.05
Warrants outstanding, December 31, 2018		21,055,355		$	0.09
Warrants granted		11,180,084			0.07
Warrants exercised		(10,629,493	)		0.05
Warrants cancelled		(8,540,862	)		0.07
Warrants outstanding, December 31, 2019		13,065,084		$	0.11

At December 31, 2019 the price of the Company’s common stock was $0.16 per share and the aggregate intrinsic value of the warrants outstanding was $961,000. As of December 21, 2019, 13,031,751 warrants were fully vested and 33,333 warrants vest in January 2020.

	Outstanding Warrants						Exercisable Warrants
Warrant Exercise Price Per Share	Shares		Life (Years)		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
$ 0.05 - $ 0.24		10,995,084		0.4	$	0.07		10,961,751	$	0.07
$ 0.25 - $ 0.49		2,000,000		1.8		0.30		2,000,000		0.30
$ 0.50 - $ 1.00		70,000		4.3		0.80		70,000		0.80
		13,065,084		0.7	$	0.11		13,031,751	$	0.11

Year Ending December 31, 2019

In February through December 2019, pursuant to terms of convertible notes issued, the Company granted warrants to purchase 10,913,420 shares of common stock with an exercise price of $0.05 to $0.15 per share, vesting immediately upon grant and expiring one year from the date of grant. See Note 5 for further discussion.

In May through December 2019, pursuant to terms of a consulting agreement, the Company granted warrants to purchase 266,664 shares of common stock with an exercise price of $0.11 to $0.24 per share, vesting 1 to 3 months from the date of grant and expiring two years from the date of grant. Total fair value of these options at grant date was approximately $27,000 using the Black-Scholes Option Pricing model with the following assumptions: life of 2 years; risk free interest rate of 1.56% to 1.63%; volatility of 148% to 163%; and dividend yield of 0%. During the year ended December 31, 2019, the Company recognized compensation expense of $24,000 based on the fair value of the warrants that vested.

Year Ending December 31, 2018

In February through December 2018, pursuant to terms of convertible notes issued, the Company granted warrants to purchase 18,238,688 shares of common stock with an exercise price of $0.05 to $0.08 per share, vesting immediately upon grant and expiring one year from the date of grant. See Note 5 for further discussion.