XML 33 R21.htm IDEA: XBRL DOCUMENT v3.7.0.1
14. STOCK OPTIONS AND WARRANTS
 12 Months Ended
Dec. 31, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
STOCK OPTIONS AND WARRANTS

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 (plus annual increases as defined in the plan of 1,500,000 shares for a total of 31,500,000 shares at December 31, 2016) pursuant to the exercise of stock options or other awards granted under the Plan.

 

In 2008, the Board approved the 2008 equity Incentive Plan, which authorizes 6,108,571 shares under the plan. Exercise rights may not expire more than three months after the date of termination of the employee but may expire in less time as stipulated in the individual grant notice. For disability or death, the optionee or estate will generally have up to twelve months to exercise their options. For certain options the Company may have rights of first refusal for a stipulated period of time, under a separate stock restriction agreement, whereby if the holder exercise the options and then desires to sell the underlying shares, the Company has the right to repurchase such shares at a price to which the holder has agreed to sell them to a third party.

 

Stock Options

 

The Company follows the provisions of ASC Topic 718, “Compensation – Stock Compensation.” ASC Topic 718 establishes standards surrounding the accounting for transactions in which an entity exchanges its equity instruments for goods or services. ASC Topic 718 focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions, such as options issued under the Company’s Stock Option Plans. The Company’s stock option compensation expense was $442,871 and $15,833 for the years ended December 31, 2016 and 2015, respectively, and there was $198,378 of total unrecognized compensation cost related to unvested options granted under the Company’s options plans as of December 31, 2016. This stock option expense will be recognized through March 2020.

 

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.

 

From January 1, 2015 through December 31, 2015, the Company issued 150,000 stock options under the plans which all vest over 4 years, have a term of 10 years, and a total valuation of $18,483.

 

From January 1, 2016 through December 31, 2016, the Company issued 5,380,000 stock options under the plans with a total valuation of $622,109. Of these stock options, 200,000 have a 5 year term while the remaining 5,180,000 have a 10 year term.

 

We used the following assumptions for options granted in fiscal 2016 and 2015:

 

  2016 2015
Expected volatility 103.59% -114.93% 169.62%
Expected remaining term 2.5-6.5 Years 7 Years
Risk-free interest rate 0.16% -0.50% 0.66%
Expected dividend yield None None

 

The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s stock options and warrants have characteristics different from those of its traded stock, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of such stock options. The risk free interest rate is based upon quoted market yields for United States Treasury debt securities with a term similar to the expected term. The expected dividend yield is based upon the Company’s history of having never issued a dividend and management’s current expectation of future action surrounding dividends. Expected volatility was based on historical data for the trading of our stock on the open market. The expected lives for such grants were based on the simplified method for employees and directors.

 

All options qualify as equity pursuant to ASC 815-40-25, “Contracts in Entity’s Own Equity.”

 

Option activity for the years ended December 31, 2016 and 2015 under the 2008 and 2011 Plans are as follows:

 

   Number of
Options		  

Weighted

Average

Exercise

Price

 
Outstanding at December 31, 2014   15,387,007   $0.28 
Granted   150,000    0.13 
Exercised   –    – 
Forfeited   200,000    0.22 
Expired   –    – 
Outstanding at December 31, 2015   15,337,007   $0.28 
Granted   5,380,000    0.15 
Exercised   –    – 
Forfeited   800,000    0.19 
Expired   –    – 
Outstanding at December 31, 2016   19,917,007   $0.25 
Exercisable at December 31, 2016   16,555,133   $0.28 
Weighted average grant date fair value       $0.12 

 

The following table summarizes information about employee stock options outstanding at December 31, 2016:

 

  Options Outstanding   Options Exercisable 
Range of
Exercise Price		  Number
Outstanding at
December 31, 2016		   Weighted
Average
Remaining
Contractual
Life		  Weighted
Average
Exercise
Price		   Aggregate
Intrinsic
Value		   Number
Exercisable
at
December 31, 2016		   Weighted
Average
Exercise
Price		   Aggregate
Intrinsic
Value		 
$0.13-1.31   19,917,007   5.16 Years  $0.25   $–    16,555,133   $0.28   $– 
    19,917,007   5.16 Years  $0.25   $–    16,555,133   $0.28   $– 

 

As the Company’s stock price was lower than the weighted average exercise price at December 31, 2016, there is no aggregate intrinsic value of the options.

 

Options exercisable have a weighted average remaining contractual life of 4.22 years as of December 31, 2016.

 

Warrants

 

2016

 

As a part of the Company’s private placement, the Company effectively issued 291,667 warrants in the twelve months ended December 31, 2016 to the placement agents.  These warrants, valued at $30,419, are exercisable for 5 years at an exercise price of $0.15 per share. The Company estimated the fair value of the warrants utilizing the Black-Scholes pricing model. The assumptions used in the valuation of these warrants include volatility of 102.99%, expected dividends of 0.0%, a discount rate of 0.50%, and expected term of 5 years. There was no financial statement accounting effect for the issuance of these warrants as their fair value has been charged to Additional Paid-in-Capital as an offering cost and was offset by a credit to Additional Paid-in-Capital for their fair value when recording the issuance of these warrants.

 

During the twelve months ended December 31, 2016, 1,314,286 warrants had expired.

 

In December 2015, The Company had consented to the original Purchase Option Agreement between GreenCore and Mr. Robert Noble (our founder and former Chairman) in which Mr. Noble agreed to sell his interest in a convertible note issued by the Company in addition to all of his shares in the Company. Under a Note Settlement and General Release Agreement, provided the Option is exercised in full and Mr. Noble complies with it, the Company agreed to extend the expiration date of the 1,138,120 warrants to purchase 1,138,120 shares of the Company’s common stock owned by Mr. Noble (the “Warrants”) from December 31, 2016 to December 31, 2017, and agreed to reduce the exercise price of such Warrants from $0.24 to $0.20 per share (see Note 9). The Company was notified and has agreed that this transaction closed in December 2016 and has effected the change to the warrant terms. As such, the Company has recorded a warrant modification expense amounting to $48,302.

 

2015

 

There was no new warrant activity during 2015.

 

Warrant activity for the years ended December 31, 2016 and 2015 are as follows:

 

   Number of
Warrants		  

Weighted

Average

Exercise

Price

 
Outstanding at December 31, 2014   29,219,441   $0.18 
Granted   –    0.16 
Exercised   –    – 
Forfeited   –    – 
Expired   –    – 
Outstanding at December 31, 2015   29,219,441   $0.18 
Granted   291,667   $0.15 
Exercised   –    – 
Forfeited   –    – 
Expired   1,314,286    0.33 
Outstanding at December 31, 2016   28,196,822   $0.17 
Exercisable at December 31, 2016   28,196,822   $0.17 
Weighted average grant date fair value       $0.10 

 

Warrants exercisable have a weighted average remaining contractual life of 0.60 years as of December 31, 2016.