|6 Months Ended|
Jun. 30, 2017
NOTE 4 – EQUITY TRANSACTIONS
During the six months ended June 30, 2017, the Company issued an aggregate of 750,000 shares of restricted common stock to an existing shareholder and former officer/employee for cash of $300,000. The common shares had a fair value of $510,000 at the date of sale, and as a result, the Company reflected an additional expense of $210,000 to account the difference between the sale price and the fair market value of common shares sold.
During the six months ended June 30, 2017, the Company issued an aggregate of 1,250,000 shares of restricted common stock to employees with a total fair value of $847,000 for services rendered. The shares issued are non-refundable and deemed earned upon issuance. As a result, the Company expensed the entire $847,000 upon issuance. The shares issued were valued at the date earned under the respective agreements.
During the six months ended June 30, 2017, the Company issued an aggregate of 2,715,000 shares of restricted common stock to consultants with a total fair value of $1,699,000. The shares issued are non-refundable and deemed earned upon issuance. As a result, the Company expensed the entire $1,699,000 upon issuance. The shares issued were valued at the date earned under the respective agreements.
Common Stock with Vesting Terms:
The following table summarizes common stock with vesting terms activity:
In February 2015, the Company granted and issued 500,000 shares of its restricted common stock to a consultant pursuant to a consulting agreement. The 500,000 shares are forfeitable and are deemed earned upon completion of service over a period of twenty-four months. The Company recognizes the fair value of these shares as they vest. As of December 31, 2016, 479,167 of these shares had vested and 20,833 common shares unvested. During the six months ended June 30, 2017, the remaining 20,833 of these shares vested and as a result, the Company recognized compensation cost of $46,000. As of June 30, 2017, there were no unvested shares and no unearned compensation costs to be recorded.
When calculating basic net income (loss) per share, these shares are included in weighted average common shares outstanding from the time they vest. When calculating diluted net income per share, these shares are included in weighted average common shares outstanding as of their grant date.
The following table summarizes common stock options activity:
During the period ended June 30, 2017, the Company granted stock options to consultants to purchase a total of 720,000 shares of common stock. A total of 440,000 options vested upon grant while the remaining 280,000 options will vest through February 2018 at a rate of 35,000 shares per month. The options are exercisable at $1.00 per share and will expire over 4 years. The fair values of the options are recorded at their respective grant dates computed using the Black-Scholes Option Pricing Model. During the six months ended June 30, 2017, the Company recognized $247,000 in compensation expense based upon the vesting of outstanding options. As of June 30, 2017 the unamortized compensation expense for unvested options was $167,000 which will be recognized over the vesting period.
The weighted average exercise prices, remaining lives for options granted, and exercisable as of June 30, 2017, were as follows:
At June 30, 2017, the Company’s closing stock price was $0.51 per share. As all outstanding options had an exercise price greater than $0.51 per share, there was no intrinsic value of the options outstanding at June 30, 2017.
The following table summarizes common stock warrants activity:
In March 2017, pursuant to an employee separation agreement, the Company granted warrants to purchase a total of 1,000,000 shares of restricted common stock with an exercise price of $1.50 and $2.00 which will expire December 31, 2018. The warrants are fully vested and exercisable upon grant. Total fair value of the warrants at grant date amounted to $290,000 computed using the Black-Scholes Option Pricing Model and was fully recognized on the date of grant.
The weighted average exercise prices, remaining lives for warrants granted, and exercisable as of June 30, 2017, were as follows:
At June 30, 2017, the Company’s closing stock price was $0.51 per share and the aggregate intrinsic value of the warrants outstanding at June 30, 2017 was $2,000.
The table below represents the average assumptions used in valuing the stock options and warrants granted in fiscal 2017:
The assumptions used in the Black Scholes models referred to above are based upon the following data: (1) the contractual life of the underlying non-employee options is the expected life. The expected life of the employee option is estimated by considering the contractual term of the option, the vesting period of the option, the employees’ expected exercise behavior and the post-vesting employee turnover rate. (2) The expected stock price volatility was based upon the Company’s historical stock price over the expected term of the option. (3) The risk-free interest rate is based on published U.S. Treasury Department interest rates for the expected terms of the underlying options. (4) The expected dividend yield was based on the fact that the Company has not paid dividends to common shareholders in the past and does not expect to pay dividends to common shareholders in the future. (5) The expected forfeiture rate is based on historical forfeiture activity and assumptions regarding future forfeitures based on the composition of current grantees.
The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.
Reference 1: http://www.xbrl.org/2003/role/presentationRef