XML 76 R22.htm IDEA: XBRL DOCUMENT

15. STOCK OPTIONS AND WARRANTS

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

15.

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 630,000 shares of the Company’s common stock 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 122,171 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 $48,915 and $111,572 for the years ended December 31, 2019 and 2018, respectively, and there was $188,564 of total unrecognized compensation costs related to outstanding stock options at December 31, 2019.

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 year ended December 31, 2019, the Company granted 58,204 stock options under the plans with a total valuation of $58,204 and a 10-year term.

During the year ended December 31, 2018, the Company granted 14,150 stock options under the plans with a total valuation of $94,204 and a 10-year term.

We used the following assumptions for options granted in fiscal 2019 and 2018:

	2019	2018
Expected volatility	78.47%-82.26%	82.40%
Expected term	5-7 Years	5 Years
Risk-free interest rate	1.73%-1.92%	2.59%
Weighted average FV	$4.02	$6.66

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 Company has never issued a dividend nor does management currently expect to in the near future. 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, 2019 and 2018 under the 2008 and 2011 Plans are as follows:

	Number of Options			Weighted Average Exercise Price
Outstanding at December 31, 2017		304,327		$	11.50
Granted		14,150			10.00
Exercised		–			–
Forfeited		(20,300	)		9.50
Expired		(1,771	)		31.50
Outstanding at December 31, 2018		296,406		$	11.50
Granted		58,204			5.52
Exercised		–			–
Forfeited		(84,350	)		11.71
Expired		(30,556	)		16.37
Outstanding at December 31, 2019		239,704		$	9.25
Exercisable at December 31, 2019		195,715		$	10.02

The following table summarizes information about employee stock options outstanding at December 31, 2019:

Options exercisable have a weighted average remaining contractual life of 4.74 years as of December 31, 2019:

	Options Outstanding								Options Exercisable
Range of Exercise Price	Number Outstanding at December 31, 2019		Weighted Average Remaining Contractual life		Weighted Average Exercise Price		Aggregate Intrinsic Value		Number Exercisable at December 31, 2019		Weighted Average Exercise Price		Aggregate Intrinsic Value
$4.09 - $8.00		148,404		7.93 Years	$	6.73	$	5,187		104,415	$	7.13	$	5,187
$10.00 - $13.50		91,300		1.89 Years		13.33		–		91,300		13.33		–
		239,704		5.63 Years	$	9.25	$	5,187		195,715	$	10.02	$	5,187

Options exercisable have a weighted average remaining contractual life of 4.73 years as of December 31, 2018:

	Options Outstanding								Options Exercisable
Range of Exercise Price	Number Outstanding at December 31, 2018		Weighted Average Remaining Contractual life		Weighted Average Exercise Price		Aggregate Intrinsic Value		Number Exercisable at December 31, 2018		Weighted Average Exercise Price		Aggregate Intrinsic Value
$6.50 - $16.50		296,412		4.75 Years	$	11.50	$	–		293,495	$	11.50	$	–
		296,412		4.75 Years	$	11.50	$	–		293,495	$	11.50	$	–

Warrants

2019

As part of the Company’s public offering (see above), the Company issued 2,300,000 warrants in April 2019 to the Underwriters. These warrants are exercisable for five years at an exercise price of $6.30 per share. In April 2019, pursuant to the Underwriting Agreement, the Company issued as a fee to the Underwriters warrants to purchase up to a total of 110,001 shares of common stock (5% of the shares of common stock sold). The warrants are exercisable at $6.60 per share and have a term of five years. There was no financial statement accounting effect for the issuance of these warrants.

2018

For the year ended December 31, 2018, as a part of the Company’s private placement, the Company issued 5,467 warrants to the placement agents. These warrants, valued at $26,206, are exercisable for 5 years at an exercise price of $7.50 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 79.39%, expected dividends of 0.0%, a discount rate of 1.50%, 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 year ended December 31, 2018 as a result of Draw Downs on our Convertible Line of Credit with Lender, the Company issued 8,156 common stock purchase warrants with a total value of $61,282 and each with a $8.89 exercise price and 3-year term. 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 82.55%, expected dividends of 0.0%, a discount rate of 1.50%, and expected term of 3 years. As a result of this transaction, the Company recorded $50,591 of debt discount consisting of the relative fair value of the warrants which is being amortized to interest expense over the term of the drawdown.

In connection to the issuance of a Note Payable on August 27, 2018, the Company issued 18,000 common stock purchase warrants with a total value of $115,521 and each with a $12.50 exercise price and a 5-year term. 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 82.68%, expected dividends of 0.0%, a discount rate of 2.35%, and expected term of 5 years. As a result of this transaction, the Company recorded $100,102 of debt discount consisting of the relative fair value of the warrants which is being amortized to interest expense over the term of the note.

Warrant activity for the years ended December 31, 2018 and 2019 are as follows:

	Number of Warrants			Weighted Average Exercise Price
Outstanding at December 31, 2017		115,638		$	8.50
Granted		31,622			10.50
Exercised		–			–
Forfeited		–			–
Expired		(12,901	)		12.50
Outstanding at December 31, 2018		134,359		$	8.57
Granted		2,410,001			6.31
Exercised		–			–
Forfeited		–			–
Expired		(8,570	)		12.50
Outstanding at December 31, 2019		2,535,790		$	6.41
Exercisable at December 31, 2019		2,535,790		$	6.41

Exercisable warrants have a weighted average remaining contractual life of 4.15 years as of December 31, 2019. As the Company’s stock price was lower than the exercise price of the warrants at December 31, 2019, there is no intrinsic value of the warrants.