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Stockholders' Equity (Deficit)

12 Months Ended

Dec. 31, 2017

Equity [Abstract]

Stockholders' Equity (Deficit)

NOTE 6 - STOCKHOLDERS’ EQUITY (DEFICIT)

Stock-Based Compensation

In connection with the consummation of the Merger completed on February 12, 2016, we adopted the pre-merger Protagenic Therapeutics, Inc.’s 2006 Employee, Director and Consultant Stock Plan (the “2006 Plan”). On June 17, 2016, our stockholders adopted our 2016 Equity Compensation Plan (the “2016 Plan”) and, as a result, we terminated the 2006 Plan. We will not grant any further awards under the 2006 Plan. All outstanding grants under the 2006 Plan will continue in effect in accordance with the terms of the particular grant and the 2006 Plan.

Pursuant to the 2016 Plan, the Company’s Compensation Committee may grant awards to any employee, officer, director, consultant, advisor or other individual service provider of the Company or any subsidiary. On January 1, 2017, pursuant to an annual “evergreen” provision contained in the 2016 Plan, the number of shares reserved for future grants was increased by 564,378 shares. As a result of this increase, as of January 1, 2017, the aggregate number of shares of common stock available for awards under the 2016 Plan is 2,712,678. Options issued under the 2016 Plan are exercisable for up to 10 years from the date of issuance.

There were 3,566,299 options outstanding as of December 31, 2017. The fair value of each stock option granted was estimated using the Black-Scholes assumptions and or factors as follows:

Exercise price		$	1.25 - $1.75
Expected dividend yield			0	%
Risk free interest rate			1.54% - 2.40	%
Expected life in years			5
Expected volatility			146% - 266	%

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		$	0.26 - $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:

						Weighted Average				Weighted Average
		Number				Exercise Price				Remaining Life
*Stock Options*

Outstanding January 1, 2016			1,707,744			$	0.84				6.45
Granted			1,308,300			$	1.25				10.35
Expired			(506,599	)		$	0.26
Converted			(25,000	)		$	0.26
Outstanding December 31, 2016			2,484,445			$	1.18				9.82
Granted			1,103,000			$	1.68				8.96
Expired			(21,146	)		$	1.00
Outstanding December 31, 2017			3,566,299			$	1.33				8.05

A summary of the status of the Company’s nonvested shares as of December 31, 2017, and changes during the year ended December 31, 2017, is presented below:

Nonvested Shares		Shares				Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2017			1,211,463			$	1.25
Granted			1,103,000			$	1.68
Vested			(800,456	)		$	1.36
Forfeited			(21,146	)		$	1.00
Nonvested at December 31, 2017			1,492,861			$	1.54

As of December 31, 2017, the Company had 3,566,299 shares issuable under options outstanding at a weighted average exercise price of $1.33 and an intrinsic value of $181,537.

The total number of options granted during the year ended December 31, 2017 and 2016 was 1,103,000 and 1,308,300, respectively. The exercise price for these options was $1.25 per share or $1.75 per share.

The Company recognized compensation expense related to options issued of $888,281 and $546,134 during the years ended December 31, 2017 and 2016, respectively, which is included in general and administrative expenses. For the year ended December 31, 2017, $635,400 of the stock compensation was related to employee and $281,568 was related to non-employees.

As of December 31, 2017, the unamortized stock option expense was $1,796,263 with $1,039,638 being related to employees and $756,625 being related to non-employees. As of December 31, 2017, the weighted average period for the unamortized stock compensation to be recognized is 8.19 years.

On October 16, 2017, the Board granted 953,000 options to employees, consultants and Board members. These options shall have 10-year expiration dates, 12 to 48 month vesting cycles, and a strike price of $1.75 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 5.

A summary of warrant issuances are as follows:

						Weighted Average				Weighted Average
		Number				Exercise Price				Remaining Life
*Warrants*

Outstanding January 1, 2017			3,826,658			$	1.05				5.61
Granted			-				-				-
Outstanding December 31, 2017			3,826,658			$	1.05				4.69

As of December 31, 2017 the Company had 3,826,658 shares issuable under warrants outstanding at a weighted average exercise price of $1.05 and an intrinsic value of $763,342.

During the year ended December 31, 2017, the expiration date for the 100,000 share warrant held by a former consultant was extended by 3 years from January 2, 2017 to January 2, 2020. Related to this warrant modification a compensation expense of $99,782 was recorded.