Annual report pursuant to Section 13 and 15(d)

Stock Options

v2.4.1.9
Stock Options
12 Months Ended
Dec. 31, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock Options

NOTE 15 – STOCK OPTIONS

 

Stock based compensation

 

During the twelve months ended December 31, 2014, the Company issued options to employees and outside consultants, which allowed the employees and outside consultants to purchase an aggregate of 16,100,000 shares of the common stock exercisable at prices ranging from $0.05 to $0.25 per share. The options vested immediately and have a term of three years. These options have a fair value of approximately $5,000,000, which was calculated using the Black-Scholes option pricing model, and has been included as a separate line item in the accompanying consolidated statement of operations for the twelve months ended December 31, 2014.

 

During the twelve months ended December 31, 2014, three option holders exercised their options to purchase 448,993 shares of the Company’s common stock in a non-cash transaction and received approximately 448,993 shares of the Company’s common stock.

 

During the twelve months ended 2013, the Company issued 4,820,000 options to purchase common stock to various employees for services rendered. These options were granted with an exercise price of $0.05, have a contract term of three years and vested immediately. The options have a fair value of $238,761, which was calculated using the Black-Scholes option pricing model, and has been shown as a separate line item in the accompanying consolidated statement of operations for the twelve months ended December 31, 2013.

 

Stock option activity is presented in the table below:

 

      Number of
Shares
    Weighted
average
Exercise Price
    Weight average
Contractual
Term (years)
    Aggregate
Intrinsic Value
 
                           
Outstanding at December 31, 2012       5,290,640     $ 0.03       7.95        
                                   
Granted       4,820,000       0.05       3.00        
                                   
Outstanding at December 31, 2013       10,110,640       .08       2.75        
                                   
Granted       16,100,000       0.15       10.00        
Exercised       (448,993 )     (0.05       (3.00 )        
                                   
Outstanding at December 31, 2014       25,761,647     $ 0.09       6.20        

 

The Company recognized stock compensation expense as follows:

 

Year ended
December 31, 2014
    Year ended
December 31, 2013
 
$ 5,224,258     $ 1,903,606  
             

 

The total remainder of stock compensation expense to be recognized through the vesting period of the above options, at December 31, 2014, was approximately $385,000.

 

The fair value of the options granted during the various periods was estimated at the date of grant using the Black-Scholes option-pricing model and the following assumptions:

 

    2014     2013  
Year Options were granted            
Market value of stock on grant date   $ .30 - .35     $ .05 -.25  
Risk-free interest rate     .61 %     .61 %
Dividend Yield     0 %     0 %
Volatility Factor     300 %     300 %
Weighted average expected life     10 years       3 years  
Expected forfeiture rate     0 %     0 %

 

The total number of options vested as of December 31, 2014 was 22,684,292 and the total options expected to vest, as of December 31, 2014, was 25,761,647. 

 

Stock Incentive Plan

 

On November 11, 2014, the Company adopted the 2014 Stock Incentive Plan. The plan provides for Options, Stock Appreciation Rights, Dividend Equivalent Rights Restricted Stock, Restricted Stock Units or other rights or benefits under the Plan. The maximum aggregate number of Shares which may be issued pursuant to all Awards (including Incentive Stock Options) is five million (5,000,000) Shares. The Shares may be authorized, but unissued, or reacquired Common Stock. In addition, Dividend Equivalent Rights shall be payable solely in cash and therefore the issuance of Dividend Equivalent Rights shall not be deemed to reduce the maximum aggregate number of Shares which may be issued under the Plan. The plan has a term of ten years.

 

Under the terms of this plan, shares vest as follows: 25% of the shares subject to the Option shall vest twelve (12) months after the Vesting Commencement Date, and 1/48 of the Shares subject to the Option shall vest on each monthly anniversary of the Vesting Commencement Date thereafter. From November 11, 2014 to December 31, 2014, a minor number of shares vested. 

 

Stock option under the Incentive Stock Option Plan activity is presented in the table below:

 

      Number of Shares     Weighted average Exercise Price     Weight average Contractual
Term (years)
 
                     
Outstanding at December 31, 2012           $        
                           
Granted                          
                           
Outstanding at December 31, 2013           $        
                           
Granted       700,000       0.15       3.00  
                           
Outstanding at December 31, 2014       700,000     $ 0.15       3.00  

 

None of the above options were exercised or forfeited in 2014.