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Stockholders' Equity (Deficit)

3 Months Ended

Mar. 31, 2018

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, 2018, 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 3,846,299 options outstanding as of March 31, 2018. 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			2.56% - 2.74	%
Expected life in years			4.25-9.90
Expected volatility			144% - 147	%

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

Exercise price		$	1.00 - $1.25
Expected dividend yield			0	%
Risk free interest rate			1.93% - 2.40	%
Expected life in years			4.60 – 9.84
Expected volatility			210% - 266	%

The following is an analysis of the stock option grant activity under the Plan:

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

Outstanding January 1, 2017			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
Granted			280,000			$	1.75				9.90
Expired			-
Outstanding March 31, 2018			3,846,299			$	1.36				7.96

A summary of the status of the Company’s nonvested shares as of March 31, 2018, and changes during the three months ended March 31, 2018, is presented below:

Nonvested Shares		Shares				Weighted-Average Grant-Date Fair Value
Nonvested at January 1, 2018			1,492,861			$	1.54
Granted			280,000			$	1.75
Vested			(296,609	)		$	1.52
Forfeited			-				-
Nonvested at March 31, 2018			1,476,252			$	1.54

As of March 31, 2018, the Company had 3,846,299 shares issuable under options outstanding at a weighted average exercise price of $1.36 and an intrinsic value of $181,537.

The total number of options granted during the three months ended March 31, 2018 and 2017 was 280,000 and 150,000, respectively. The exercise price for these options was $1.75 per share or $1.25 per share.

The Company recognized compensation expense related to options issued of $344,647 and $355,336 during the three months ended March 31, 2018 and 2017, respectively, which is included in general and administrative expenses and research and development expenses. For the three months ended March 31, 2018, $166,213 of the stock compensation was related to employees and $178,434 was related to non-employees.

As of March 31, 2018, the unamortized stock option expense was $1,825,468 with $897,671 being related to employees and $927,797 being related to non-employees. As of March 31, 2018, the weighted average period for the unamortized stock compensation to be recognized is 2.93 years.

On January 24, 2018, the Company entered into a consulting agreement (the “Agreement”) with NeuroAssets Sàrl (“Consultant”), a Swiss company. As part of the agreement, on February 20, 2018, the Compensation Committee of the Company’s Board of Directors approved a grant of 200,000 options under our 2016 Equity Compensation Plan. The options vest over 48 months in equal monthly installments with the first monthly vesting event scheduled to occur on March 20, 2018, have a term of 10 years and are exercisable at a price of $1.75 per share. The vesting of the options will accelerate if a corporate partnership results from an introduction made by Consultant.

During the first quarter the Company granted 80,000 stock options to four consultants. 50,000 of these options vest immediately and the remaining 30,000 options vest monthly over 48 months, have an exercise price of $1.75, and have a term of 10 years.

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 Remaining
		Number				Exercise Price				Life
*Warrants*

Outstanding January 1, 2018			3,826,658			$	1.05				4.69
Granted			-				-				-
Outstanding March 31, 2018			3,826,658			$	1.05				4.44

As of March 31, 2018 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.