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8. STOCK OPTIONS AND WARRANTS
9 Months Ended
Sep. 30, 2011
Shareholders' Equity and Share-based Payments [Text Block]
8.    STOCK OPTIONS AND WARRANTS

Stock Options

On August 10, 2011, the Company’s Board of Directors approved and caused the Company to adopt the Envision Solar International, Inc. 2011 Stock Incentive Plan (the “Plan”), which authorizes the issuance of up to 30,000,000 shares of the Company’s common stock pursuant to the exercise of stock options or other awards granted under the Plan.

From January 1, 2011 through September 30, 2011, the Company granted 16,582,856 stock options with a total valuation of $2,578,418 to certain executives and board members.  Of these amounts, 9,162,856 were granted to Robert Noble, executive chairman, in exchange for the cancellation of 6,027,663 previously granted options per the terms of an earlier agreement executed by Mr. Noble and the Company.

The fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model.  This model incorporates certain assumptions for inputs including a risk-free market interest rate, expected dividend yield of the underlying common stock, expected option life and expected volatility in the market value of the underlying common stock.

During the three and nine months ended September 30, 2011, the Company recorded stock based compensation of $909,057 and $929,937, respectively.

Warrants

During the three months ended June 30, 2010, the Company issued a Private Placement Memorandum (“PPM”) to raise capital for the business. Under the PPM investors are entitled to receive warrants equal to the number of shares that were purchased. As of September 30, 2011, the Company had issued 7,916,245 warrants to purchase stock based on the number of shares sold. The warrants have an exercise price of $0.50 per share and expire 2 years from the date of issuance. The Company has the right to call and repurchase the warrants at any time after the common stock of the Company has traded at a last sale price of one dollar ($1.00) or more per share for twenty (20) days in the public securities trading market where it is quoted (i.e. currently the OTC Bulletin Board), for a repurchase price of $0.01 per warrant. Each warrant holder will have a period of twenty (20) days from the date of notice of the call to exercise the warrant before it is repurchased by the Company.

As a part of the PPM discussed above, as of September 30, 2011, the Company has issued 714,286 warrants to the placement agents.  These warrants are exercisable for 5 years at an exercise price of $0.40 per share.

In August 2011, the Company issued 600,000 warrants, each with a five year term and exercise price of $0.25, for investor relations and financial advisory services to a Company controlled by Jay Potter, our Director.  These warrants, valued at $119,360 using the Black-Scholes valuation methodology, will be expensed over the six month term of the agreement. See Note 9.