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Stockholders' Equity (Deficit)

9 Months Ended

Sep. 30, 2019

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 Prior Protagenic’s 2006 Employee, Director and Consultant Stock Plan (the “2006 Plan”). On June 17, 2016, our stockholders adopted 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 each of January 1, 2017 and January 1, 2019, 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, or a total of 1,128,756 shares. As a result of this increase, as of September 30, 2019, the aggregate number of shares of common stock available for awards under the 2016 Plan was 3,739,867 shares. Options issued under the 2016 Plan are exercisable for up to ten years from the date of issuance.

There were 3,972,866 options outstanding as of September 30, 2019. The fair value of each stock option granted was estimated using the Black-Scholes assumptions and or factors as follows:

Exercise price		$	1.00 - $1.75
Expected dividend yield			0	%
Risk free interest rate			2.09% - 2.70	%
Expected life in years			10
Expected volatility			137% - 140	%

There were 3,846,299 options outstanding as of December 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			2.73% - 2.85	%
Expected life in years			3.75-9.40
Expected volatility			139% - 146	%

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 December 31, 2017			3,566,299			$	1.33				8.05
Granted			280,000			$	1.75				9.15
Expired			-
Outstanding December 31, 2018			3,846,299			$	1.36				7.20
Granted			126,567			$	1.15				9.70
Expired			-
Outstanding September 30, 2019			3,972,866			$	1.36				6.52

A summary of the status of the Company’s nonvested option as of September 30, 2019, and changes during the nine months ended September 30, 2019, is presented below:

Nonvested Options		Options				Weighted- Average Exercise Price
Nonvested at December 31, 2017			1,492,861			$	1.54
Granted			280,000			$	1.75
Vested			(972,651	)		$	1.29
Forfeited			-				-
Nonvested at December 31, 2018			800,210			$	1.63
Granted			126,567			$	1.15
Vested			(544,187	)		$	1.35
Forfeited			-				-
Nonvested at September 30, 2019			382,590			$	1.43

As of September 30, 2019, the Company had 3,972,866 shares issuable under options outstanding at a weighted average exercise price of $1.36 and an intrinsic value of $168,572.

The total number of options granted during the nine months ended September 30, 2019 and 2018 was 126,567 and 280,000, respectively. The exercise price for these options was $1.00 per share or $1.25 per share.

The Company recognized compensation expense related to options issued of $139,066 and $261,138 during the three months ended September 30, 2019 and 2018, respectively, which is included in general and administrative expenses and research and development expenses. For the three months ended September 30, 2019, $74,005 of the stock compensation was related to employees and $65,061 was related to non-employees.

The Company recognized compensation expense related to options issued of $850,767 and $868,933 during the nine months ended September 30, 2019 and 2018, respectively, which is included in general and administrative expenses and research and development expenses. For the nine months ended September 30, 2019, $524,739 of the stock compensation was related to employees and $326,028 was related to non-employees.

As of September 30, 2019, the unamortized stock option expense was $582,235 with $255,159 being related to employees and $327,076 being related to non-employees. As of September 30, 2019, the weighted average period for the unamortized stock compensation to be recognized is 2.87 years.

On February 25, 2019, the Company granted 101,567 options with an exercise price of $1.00 and a ten year term. 59,900 of these options vest immediately and 41,667 vest bi-weekly over two months. These options have a Black-Scholes value of $199,807.

On June 17, 2019, the Company granted 25,000 options with an exercise price of $1.75 and a ten year term. These options vest immediately and have a Black-Scholes value of $36,374.

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, the holder 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. All of these warrants automatically converted into warrants to purchase our common stock upon the effectiveness of our reverse stock split in July 2016. See Note 5.

A summary of warrant issuances are as follows:

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

Outstanding December 31, 2017			3,826,658			$	1.05				4.69
Granted			-				-				-
Outstanding December 31, 2018			3,826,658			$	1.05				3.69
Granted			-				-				-
Outstanding September 30, 2019			3,826,658			$	1.05				2.94

As of September 30, 2019, 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 $3,633,335.