The Company accounts for employee stock options and non-employee stock warrants under ASC 718 and ASC 505, whereby option costs are recorded based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable, utilizing the Black Sholes pricing model. Unless otherwise provided for, the Company covers option exercises by issuing new shares.

 

Beginning on December 12, 2012, Michael A. Lanphere, a related party and non-employee, loaned the Company money for a variety of purposes, some for working capital and some to allow the Company to pay outstanding obligations. Each of these loans was made pursuant to the terms of a Loan Agreement with Promissory Note and Stock Fee (the “Agreements”). Under the terms of the Agreements, Mr. Lanphere was not only entitled to repayment of the principal amount loaned to us, with interest, but also what was termed in the Agreements as a “Stock Fee” that the parties are interpreting as a stock warrant, which permits Mr. Lanphere to acquire shares of our common stock in exchange for an exercise price that was estimated based on the date of the loan agreement. The number of shares to be issued to Mr. Lanphere as a Stock Fee under each Agreement was an estimate and varied based on the loan amount and the price of our common stock on the day of the loan and was calculated by this formula: sixty percent (60%) or eighty percent (80%) of the loan amount divided by the Company’s stock price on the day of the loan, but at a price per share no higher than two and one-half cents ($0.025). Each Stock Fee is fully vested immediately and expires five (5) years from the date of the loan. Although the Stock Fee could be taken by Mr. Lanphere as a stock grant or a stock warrant, due to the fully vested nature of the Stock Fee, Mr. Lanphere is deemed to beneficially own those shares on the date of each Agreement. The number of warrants outstanding to Mr. Lanphere at December 31, 2019 and December 31, 2018 were 15,103,261 and 10,818,583, respectively.

 

On August 8, 2019, the Company entered into an 8% Series A-1 Convertible Preferred Stock Investment agreement with First Capital Ventures (“FCV”). FCV set up a special purpose vehicle (“SPV”) that purchased 1,000,000 of the 8% Series A-1 Convertible Preferred Shares at $1.00 per share on December 12, 2019. Upon purchase, the Company issued the SPV through FCV a three year warrant to purchase 4,800,000 shares  of the Company’s common stock at an exercise price of $0.03125 per share. The number of warrants outstanding to the SPV through FCV at December 31, 2019 were 4,800,000.

   

The total outstanding balance of all non-employee stock warrants in TransBiotec, Inc. is 19,903,261 and 24,003,003 at December 31, 2019 and December 31 2018, respectively. There were 30,485,423 non-employee detached free-standing stock warrants granted during the year ended December 31, 2019 and 7,882,392 non-employee detached free-standing stock warrants granted during the year ended December 31, 2018. The relative fair value of these non-employee stock warrants granted during the year ended December 31, 2019 and 2018 totaled $159,961 and $29,701, respectively, and were determined using the Black-Sholes option pricing model based on the following assumptions:

 

		Dec. 31, 2019				Dec. 31, 2018
Exercise Price		$	.0040-$0.03125			$	0.0042-$0.0043
Dividend Yield			0	%			0	%
Volatility		134% - 167		%		141% - 144		%
Risk-free Interest Rate		1.69% – 2.40		%		2.65% – 2.68		%
Life of warrants		.038 - 5 Years				5 Years

 

The following table summarizes the changes in the Company’s outstanding warrants during the year ended December 31, 2019 and 2018:

 

		Warrants Outstanding Number of Shares				Exercise Price Per Share				Weighted Average Remaining Contractual Life		Weighted Average Exercise Price Per Share				Aggregate Intrinsic Value
Balance at December 31, 2017			16,120,611			$	0.0042 - 0.0190			4.06 Years		$	0.0066			$	-
Warrants Granted			7,882,392			$	0.0042- 0.0043			4.25 Years		$	0.0042			$	-
Warrants Exercised			-				-
Warrants Expired			-				-
Balance at December 31, 2018			24,003,003			$	0.0042-0.0190			3.45 Years		$	0.0058			$	-

    

		Warrants Outstanding Number of Shares				Exercise Price Per Share				Weighted Average Remaining Contractual Life		Weighted Average Exercise Price Per Share				Aggregate Intrinsic Value
Balance at December 31, 2018			24,003,003			$	0.0042 - 0.0190			3.45 Years		$	0.0058			$	-
Warrants Granted			30,485,423			$	0.0018664652- 0.0062			3.97 Years		$	0.0086			$	2,022,912
Warrants Exercised			(34,535,165	)			$0.0043 - $0.0045					$	0.0044
Warrants Expired			(50,000	)		$	0.019					$	0.0190
Balance at December 31, 2019			19,903,261			$	0.0040 - $0.03125			3.97 Years		$	0.0108			$	1,276,870
Exercisable at December 31, 2018			24,003,003			$	0.0042 - 0.0190			3.45 Years		$	0.0057			$	-
Exercisable at December 31, 2019			19,903,261			$	0.0040- $0.03125			3.97 Years		$	0.0108			$	1,276,870

  

On October 24, 2019, the Company’s 2019 Equity Incentive Plan went effective.  The plan was approved by the Company’s Board of Directors and the holders of a majority of the Company’s voting stock on September 9, 2019. The plan’s number of authorized shares is 128,000,000. As of December 31, 2019, the Company granted stock options to acquire 76,000,000 shares of common stock at an exercise price of $0.00792 per share under the plan.  As of December 31, 2019, the plan had 14,755,287 vested shares and 61,244,713 non-vested shares. The stock options are held by our officers, directors and certain key consultants.

 

On October 25, 2019, the Company granted Charles Bennington, one of the Company’s officers and directors, an option to acquire 800,000 shares of the Company’s common stock under its 2019 Equity Incentive Plan. The stock option has an exercise price of $0.00792 and vests quarterly over a one-year period commencing January 1, 2020. The stock option has a five-year term.

 

On October 25, 2019, the Company granted Nick Noceti, the Company’s Chief Financial Officer, an option to acquire 800,000 shares of the Company’s common stock under its 2019 Equity Incentive Plan. The stock option has an exercise price of $0.00792 and vests quarterly over a two-year period commencing January 1, 2020. The stock option has a five-year term.

 

On October 25, 2019, the Company granted Gary Graham, one of the Company’s directors, an option to acquire 800,000 shares of our common stock under its 2019 Equity Incentive Plan. The stock option has an exercise price of $0.00792 and vests quarterly over a one-year period commencing January 1, 2020. The stock option has a five-year term.

 

On October 25, 2019, the Company entered into an Employment Agreement with Kevin Moore to serve as the Company’s Chief Executive Officer. Under the terms of the agreement, the Company granted an option to Kevin Moore under its 2019 Equity Compensation Plan to acquire 35,200,000 shares of its common stock at an exercise price of $0.00792, with the stock options to vest in 36 equal monthly installments of 977,777 shares during the three-year term of the employment agreement. A total of 1,955,555 options were vested as of December 31, 2019. None of the vested stock options have been exercised and no shares have been issued during the year ended December 31, 2019.

 

On October 25, 2019, the Company entered into an Employment Agreement with David Gandini to serve as the Company’s Chief Revenue Officer. Under the terms of the agreement, the Company granted David Gandini stock options under its 2019 Equity Compensation Plan to acquire 24,000,000 shares of our common stock, at an exercise price of $0.00792, to vest in 36 equal monthly installments of 666,666 shares during the three-year term of the Agreement. David Gandini was also granted an aggregate of 8,000,000 additional option shares (the “Pre-Vesting Option Shares”) to vest as follows: (i) 6,666,600 Pre-Vesting Option Shares representing the monthly vesting option shares for the ten months ended October 31, 2019 to vest on November 1, 2019; and (ii) the remaining 1,333,400 Pre-Vesting Option Shares representing the monthly vesting option shares for the two months ended December 31, 2019 shall vest on January 1, 2020. The stock options have a ten-year term. A total of 7,999,732 options were vested as of December 31, 2019. None of the vested stock options have been exercised and no shares have been issued during the year ended December 31, 2019.

 

On October 25, 2019, the Company granted stock options to four non-affiliated individuals and entities to acquire an aggregate of 6,400,000 shares of its common stock. The stock options were issued under the 2019 Equity Incentive Plan at an exercise price of $0.00792 vesting quarterly over a two-year period commencing January 1, 2020. The stock options have either a two year or five-year term.

 

On October 27, 2019, the Company entered into a patent purchase agreement under which the Company granted stock options to a non-affiliated party to acquire 3,200,000 shares of its common stock at an exercise price of $0.03125 and vested upon grant. The stock option has a five-year term. None of these stock options have been exercised and no shares have been issued during the year ended December 31, 2019.

 

As of December 31, 2018, there were three outstanding stock options to officers, directors, and consultants to purchase 1,775,000 shares of TransBiotec, Inc. common stock. These stock options vested upon grant and either expired or were cancelled in 2019. There were 79,200,000 and no stock options granted during the year ended December 31, 2019 and 2018, respectively.

 

The following table summarizes the changes in the Company’s outstanding stock options during the year ended December 31, 2019 and 2018:

 

		Options Outstanding Number of Shares				Exercise Price Per  Share				Weighted Average Remaining Contractual Life		Weighted Average Exercise Price Per Share				Aggregate Intrinsic Value
Balance at December 31, 2017			2,225,000			$	0.0045 - 0.25			3.00 Years		$	0.0204			$	-
Options Granted			-				-
Options Exercised			(450,000	)		$	0.01
Options Cancelled			-				-
Options Expired			-				-
Balance at December 31, 2018			1,775,000			$	0.0045 – 0.25			2.32 Years		$	0.0083			$	-

 

		Options Outstanding Number of Shares				Exercise Price Per  Share				Weighted Average Remaining Contractual Life		Weighted Average Exercise Price Per Share				Aggregate Intrinsic Value
Balance at December 31, 2018			1,775,000			$	0.0045 - 0.25			2.32 Years		$	0.0083			$	-
Options Granted			79,200,000			$	0.00792 - 0.03125			9.00 Years		$	0.0089			$	5,238,080
Options Exercised			-				-
Options Cancelled			(1,500,000	)		$	0.0045					$	0.0045
Options Expired			(275,000	)		$	0.007 - 0.25			9.00 Years		$	0.0291
Balance at December 31, 2019			79,200,000			$	0.00792 - 0.03125					$	0.0089			$	5,238,080
Exercisable at December 31, 2018			1,775,000			$	0.0045 - 0.25			2.32 Years		$	0.0083			$	-
Exercisable at December 31,2019			17,955,286			$	0.00792 - 0.03125			9.00 Years		$	0.0136			$	807,801

 

Executive Stock Options

 

The Company has 76,000,000 outstanding executive stock options exercisable at $0.00792 per share with a weighted average remaining contractual life of 9 years as of December 31, 2019 and 250,000 outstanding executive stock options exercisable at $0.007 per share as of December 31, 2018. These 250,000 outstanding executive stock options expired in October 2019.

   

Stock Subscriptions Payable

 

The Company has stock subscriptions payable due to related parties of $79,624  payable with 2,962,688 of its common shares as of December 31, 2019. The Company has stock subscriptions payable due to a related party of $1,271 payable with  243,273 of its common shares at December 31, 2018. The Company recorded a related party gain of $39,992 and $20,624 related to the outstanding stock subscriptions payable during the year ended December 31, 2019 and 2018, respectively.

   

The Company has preferred stock subscriptions payable due to a related party of $1,000,000 convertible into 1,000,000 of its 8% Series A-1 Convertible Preferred shares as of December 31, 2019. The Company had no preferred stock subscriptions payable in 2018.