Stock Warrants

 

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: 60% or 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 $0.025. Each Stock Fee is fully vested immediately and expires 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. After the Company entered into a Debt Conversion and Common Stock Purchase Plan with Mr. Lanphere dated January 3, 2020, under which he agreed to exercise his stock warrants and the Company agreed to convert and issue 15,103,261 shares of its common stock to reduce a notes payable principal balance consisting of two notes in the amount of $65,875. The Company did not record a loss on debt extinguishment for this conversion pursuant to ASC 470-20-40-4 that states that upon conversion in accordance with its original terms, the carrying amount of the convertible debt without a BCF, including any unamortized premium or discount, is credited to the capital accounts and no gain or loss should be recognized. Mr. Lanphere owns no more warrants to shares of our common stock. The number of warrants outstanding to Mr. Lanphere at March 31, 2020 and December 31, 2019 were none and 15,103,261, respectively.

 

On August 8, 2019, the Company entered into an 8% Series A-1 Convertible Preferred Stock Investment agreement with First Capital Ventures, LLC (“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 March 31, 2020 and December 31, 2019 are 4,800,000 and 4,800,000, respectively.  

 

The total outstanding balance of all non-employee stock warrants in TransBiotec, Inc. is 4,800,000 and 19,903,261 at March 31, 2020 and December 31 2019, respectively. There were no non-employee detached free-standing stock warrants granted during the three month period ended March 31, 2020 and 10,582,162 non-employee detached free-standing stock warrants granted during the three month period ended March 31, 2019. The relative fair value of these non-employee stock warrants granted during the three month period ended March 31, 2020 and 2019 totaled none and $22,665, respectively, and were determined using the Black-Sholes option pricing model based on the following assumptions:

 

		Mar. 31, 2020				Mar. 31, 2019
Exercise Price			-			$0.0018664652 - $0.0114
Dividend Yield			-			0		%
Volatility			-			135% - 138		%
Risk-free Interest Rate			-			2.31% - 2.53		%
Life of Warrants			-			5 Years

 

The following table summarizes the changes in the Company’s outstanding warrants during the three month period ended March 31, 2020 and 2019, and as of March 31, 2020 and 2019:

 

		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			10,582,162			$	0.0018664652- 0.0062			4.93 Years		$	0.0028			$	13,537
Warrants Exercised			-				-
Warrants Expired			-				-
Balance at March 31, 2019			34,585,165			$	0.0018664652-0.0190			3.73 Years		$	0.0049			$	-

 

		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, 2019			19,903,261			$	0.0040 - 0.03125			3.97 Years		$	0.01080			$	1,276,870
Warrants Granted			-				-
Warrants Exercised			(15,103,261	)		$	0.0040 - $0.0046					$	0.00440
Warrants Expired			-
Balance at March 31, 2020			4,800,000			$	0.03125			2.70 Years		$	0.03125			$	18,000
Exercisable at December 31, 2019			19,903,261			$	0.0040 – 0.03125			3.97 Years		$	0.01080			$	1,276,870
Exercisable at March 31, 2020			4,800,000			$	0.03125			2.70 Years		$	0.03125			$	18,000

 

Stock Options

 

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 March 31, 2020 and December 31, 2019, the Company granted stock options to acquire 76,670,000 and 76,000,000 shares of common stock under the plan, respectively. As of March 31, 2020, the plan has 21,722,216 vested shares and 54,947,784 non-vested shares. 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.

 

The following table summarizes the changes in the Company’s outstanding stock options during the three month period ended March 31, 2020 and 2019, and as of March 31, 2020 and 2019:

                        

		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			-				-
Options Exercised			-				-
Options Cancelled			-				-
Options Expired			-				-
Balance at March 31, 2019			1,775,000			$	0.0045–0.25			2.07 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, 2019			79,200,000			$	0.00792-0.03125			8.97 Years		$	0.0089			$	5,238,080
Options Granted			670,000			$	0.00792			2.96 Years		$	0.0079			$	18,144
Options Exercised			-				-
Options Cancelled			-				-
Options Expired			-				-
Balance at March 31, 2020			79,870,000			$	0.00792-0.03125			8.57 Years		$	0.0089			$	2,088,224
Exercisable at December 31, 2019			17,955,287			$	0.00792–0.03125			8.93 Years		$	0.0121			$	1,129,785
Exercisable at March 31, 2020			24,922,216			$	0.00792-0.03125			8.93 Years		$	0.0109			$	600,238

 

Executive Stock Options                                                                                                  

 

The Company has 16,722,216 outstanding executive stock options exercisable at $0.00792 per share of March 31, 2020 and no outstanding executive stock options as of December 31, 2019. 

  

On October 25, 2019, the Company granted Charles Bennington, one of the Company’s directors, options to acquire 800,000 shares of the Company’s common stock under its 2019 Equity Incentive Plan. The stock options have an exercise price of $0.00792 and vest quarterly over a one-year period commencing January 1, 2020. The stock options have a five-year term. A total of 200,000 and 0 stock options were vested as of March 31, 2020 and December 31, 2019, respectively. None of the vested stock options have been exercised and no shares have been issued as of March 31, 2020.

 

On October 25, 2019, the Company granted Nick Noceti, the Company’s Chief Financial Officer, options to acquire 800,000 shares of the Company’s common stock under its 2019 Equity Incentive Plan. The stock options have an exercise price of $0.00792 and vest quarterly over a two-year period commencing January 1, 2020. The stock options have a five-year term. A total of 100,000 and 0 stock options were vested as of March 31, 2020 and December 31, 2019, respectively. None of the vested stock options have been exercised and no shares have been issued as of March 31, 2020.

 

On October 25, 2019, the Company granted Gary Graham, one of the Company’s directors, options to acquire 800,000 shares of the Company’s common stock under its 2019 Equity Incentive Plan. The stock options have an exercise price of $0.00792 and vest quarterly over a one-year period commencing January 1, 2020. The stock options have a five-year term. A total of 200,000 and 0 stock options were vested as of March 31, 2020 and December 31, 2019, respectively. None of the vested stock options have been exercised and no shares have been issued as of March 31, 2020.

 

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 Kevin Moore stock options under its 2019 Equity Compensation Plan to acquire 35,200,000 shares of its common stock at an exercise price of $0.00792. The stock options vest in 36 equal monthly installments of 977,777 shares during the three-year term of his Employment Agreement. 2,933,331 stock options vested during the three month period ended March 31, 2020. A total of 4,888,885 and 1,955,555 stock options were vested as of March 31, 2020 and December 31, 2019, respectively. None of the vested stock options have been exercised and no shares have been issued as of March 31, 2020 or 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 its common stock at an exercise price of $0.00792. The stock options vest in 36 equal monthly installments of 666,666 shares during the three-year term of his Employment 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. 3,333,598 stock options vested during the three month period ended March 31, 2020. A total of 11,333,330 and 7,999,732 stock options were vested as of March 31, 2020 and December 31, 2019, respectively. None of the vested stock options have been exercised and no shares have been issued as of March 31, 2020 or December 31, 2019.