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Note 7 - Stockholders' Equity (Deficit)
 12 Months Ended
Dec. 31, 2016
Notes to Financial Statements  
Stockholders' Equity Note Disclosure [Text Block]
NOTE
7
- STOCKHOLDERS’ EQUITY (DEFICIT)
 
Stock-Based Compensation
 
In connection with the Merger, all of the issued and outstanding options to purchase shares of Prior Protagenic common stock converted, on a
1
-for-
1
basis, into options (the “
New Options
”), to purchase shares of our Series B Preferred Stock. The New Options will be administered under Prior Protagenic’s
2006
Employee, Director and Consultant Stock Plan (the “
2006
Plan
”), which the Company assumed and adopted.
 
The Plan is authorized to issue up to
2,000,000
stock options. In accordance with the Plan, the Company can grant to certain employees, directors or consultants options to purchase shares of the Company’s common stock which vest automatically or ranging from a
one
-year period to a
five
-year period. The shares are exercisable over a period of
ten
years from the date of grant. The Plan provides that qualified options be granted at an exercise price equal to the fair market value at the date of grant.
 
 
There were
2,484,445
options outstanding as of
December
31,
2016.
The fair value of each stock option granted was estimated using the Black-Scholes assumptions and or factors as follows:
 
 
Exercise price
    
$.26
-
$1.25 
  
Expected dividend yield
    
0%
 
 
  
Risk free interest rate
    
1.01%
-
2.43%
  
Expected life in years
    
5
 
 
  
Expected volatility
    
85%
-
213%
  
                              
The following is an analysis of the stock option grant activity under the Plan:
 
 
 
Number
 
 
Weighted Average
Exercise Price
 
 
Weighted
Average
Remaining
Contractual
Life
 
Stock Options
 
 
 
 
 
 
 
 
 
 
 
 
                         
Outstanding January 1, 2016
   
1,707,744
    $
0.84
     
6.45
  
Granted
   
1,193,300
     $
1.25
      
10.35
  
Expired
    
(506,599
 )   $
0.26
      
 
  
Converted
    
(25,000
 )   $
0.26
      
 
  
Outstanding December 31, 2016
   
2,369,445
     $
1.18
      
9.82
  
 
As of
December
31,
2016
the Company had
2,484,445
shares issuable under options outstanding at a weighted average exercise price of
$1.04
and an intrinsic value of $
$697,820.
 
On
February
12,
2016,
the Company issued
100,000
options under the
2006
Plan to its Chief Financial Officer as a sign-on bonus. These options have an exercise price of
$1.25
per share, a
ten
-year term and vest over a
three
-year period in
35
monthly installments of
0.18
shares and a final installment of
2,778
shares. The terms of the option grant also include full vesting acceleration upon a change of control as defines. The Company recognized compensation expense related to this issuance of
$25,696
for the year ended
December
31,
2016.
 
On
April
15,
2016,
our Compensation Committee of our Board determined that each board member will be compensated an option grant of
40,000
options per year, plus
5,000
options for serving as the Chair of a committee. Options shall have
10
-year expiration dates,
24
-month vesting cycles, and a strike price of
$1.25
per share, or more in future time periods to match the fair market value of the Company’s common stock. The aggregate amount granted was
175,000
options.
 
On
April
15,
2016,
the Board granted
1,009,300
options to employees and consultants. These options shall have
10
-year expiration dates,
12
to
48
month vesting cycles, and a strike price of
$1.25
per share. Having an aggregate fair market value of
$1,261,625
on
December
31,
2016.
 
During the year,
17,785
options were granted to former Atrinsic executives. These options have
3
-year expiration dates, and a strike price of
$1.25
per share. Having an aggregate fair market value of
$22,231
on
December
31,
2016.
 
The total number of options granted and vested during the year ended
December
31,
2016
and
2015
was
1,308,300
and
1,272,982,
respectively. The exercise price for these options was
$1.25
per share.
 
The Company recognized compensation expense related to options issued of
$546,134
and
$477,868
during the years ended
December
31,
2016
and
2015,
respectively, which is included in general and administrative expenses.
 
On
June
17,
2016,
the stockholders of the Company approved the adoption of the
2016
equity compensation plan at the Special Meeting. No further options will be granted under the
2006
equity compensation plan, which we assumed in connection with the Merger.
 
On
July
31,
2016
25,000
options were exercised into common stock of the Company for
$6,500.
 
On
October
26,
2016,
the Board granted
25,000
options to an employee. These options shall have
10
-year expiration dates, a
48
month vesting cycle with a
one
-year cliff, and a strike price of
$1.25
per share.
 
Warrants:
 
In connection with the Merger, all of the issued and outstanding warrants to purchase shares of Prior Protagenic common stock, converted, on a
1
for
1
basis, into new warrants (the “
New Warrants
”) to purchase shares of our Series B Preferred Stock.
 
Simultaneous with the Merger and the Private Offering, New Warrants to purchase
3,403,367
shares of Series B Preferred Stock at an average exercise price of approximately
$1.05
per share were issued to holders of Prior Protagenic warrants; additionally, holders of
$665,000
of our debt and
$35,000
of accrued interest exchanged such debt for
five
-year warrants to purchase
295,945
shares of Series B Preferred Stock at
$1.25
per share. Placement Agent Warrants to purchase
127,346
shares of Series B Preferred Stock at an exercise price of
$1.25
per share were issued in connection with the Private offering. These warrants to purchase
423,291
shares of Series B Preferred Stock have been recorded as derivative liabilities. See Note
6.
 
A summary of warrant issuances are as follows:
 
 
  
Number
   
Weighted Average
Exercise Price
   
Weighted Average
Remaining
Life
  
Warrants
 
 
 
 
 
 
 
 
 
 
 
 
                         
Outstanding January 1, 2016
   
3,403,367
    $
1.03
      
5.80
  
Granted
   
423,291
    $
1.25
      
4.12
  
Outstanding
December 31, 2016
   
3,826,658
    $
1.05
      
5.61
  
 
As of
December
31,
2016
the Company had
3,826,658
shares issuable under warrants outstanding at a weighted average exercise price of
$1.07
and an intrinsic value of
$763,342.