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, Mr. Lanphere agreed to exercise his stock warrants and the Company agreed to convert and issue 454,097 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 June 30, 2020 and December 31, 2019 were none and 454,097, 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 144,317 shares of the Company’s common stock at an exercise price of $1.039375 per share. The number of warrants outstanding to the SPV through FCV at June 30, 2020 and December 31, 2019 are 144,317 and 144,317, respectively.

 

On June 5, 2020, at closing of the Transaction, the Company entered into a Waiver Under Asset Purchase Agreement and Post-Closing Covenant Agreement under which we issued warrants to IDTEC to purchase up to 320,000 shares of our common stock (post-split) at an exercise price of $0.50 per share. The warrants expire five years after the date of issuance.

 

The total outstanding balance of all non-employee stock warrants in the Company is 464,317 and 598,414 at June 30, 2020 and December 31 2019, respectively. There were 320,000 non-employee detached free-standing stock warrants granted during the six month period ended June 30, 2020 and 498,562 non-employee detached free-standing stock warrants granted during the six month period ended June 30, 2019. The relative fair value of these non-employee stock warrants granted during the six month period ended June 30, 2020 and 2019 totaled $695,454 and $35,030, respectively, and were determined using the Black-Sholes option pricing model based on the following assumptions:

 

		June 30, 2020				June 30, 2019
Exercise Price		$	0.50			$ 0.06 - 0.2
Dividend Yield			0	%			0	%
Volatility			153	%		135% - 138		%
Risk-free Interest Rate			0.29	%		2.31% – 2.53		%
Life of Warrants		5 Years				5 Years

         

The following table summarizes the changes in the Company’s outstanding warrants during the six month period ended June 30, 2020 and 2019, and as of June 30, 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			721,678			$	0.1397 - 0.6319			3.45 Years		$	0.1929			$	-
Warrants Granted			498,562			$	0.06 - 0.2062			4.72 Years		$	0.1064			$	22,428
Warrants Exercised			-				-
Warrants Expired			1,503			$	0.6319					$	0.6319
Balance at June 30, 2019			1,218,737			$	0.06 - 0.6319			3.68 Years		$	0.1596			$	-

 

		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			598,414			$	0.13304–1.039375			3.97 Years		$	0.3607			$	1,276,870
Warrants Granted			320,000			$	0.50			4.93 Years		$	0.50			$	768,000
Warrants Exercised			(454,097	)		$	0.13304-0.15299					$	0.7143
Warrants Expired			-
Balance at June 30, 2020			464,317			$	0.50-1.039375			4.16 Years		$	0.66765			$	1,036,521

      

Exercisable at December 31, 2019			598,414			$	0.13304 – 1.039375			3.97 Years		$	0.3607			$	1,276,870
Exercisable at June 30, 2020			464,317			$	0.050 - 1.039375			4.16 Years		$	0.66765			$	1,036,521

 

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 3,848,467. As of June 30, 2020 and December 31, 2019, the Company granted stock options to acquire 2,521,239 and 2,381,239 shares of common stock under the plan, respectively. As of June 30, 2020, the plan has 1,040,355 vested shares and 1,480,884 non-vested shares. As of December 31, 2019, the plan had 539,847 vested shares and 1,841,392 non-vested shares. The stock options are held by our officers, directors, and certain key consultants.  In total for the six months ended June 30, 2020 and 2019, the Company recorded $296,932 and none, respectively, of share-based compensation expense related to the stock options. The unrecognized compensation expense as of June 30, 2020 was approximately $348,000 for non-vested share-based awards to be recognized over periods of approximately three to seven years. The fair value of the stock options granted during the six month period ended June 30, 2020 was determined using the Black-Sholes option pricing model based on the following assumptions: exercise price $2, dividend yield 0%, volatility 153%, risk-free interest rate 0.29%, life of options 5 years.

        

The following table summarizes the changes in the Company’s outstanding stock options during the six month period ended June 30, 2020 and 2019, and as of June 30, 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			53,367			$	0.1497 – 8.31			2.32 Years		$	0.2761			$	-
Options Granted			-				-
Options Exercised			-				-
Options Cancelled			45,100			$	0.1497					$	0.1497
Options Expired			-				-
Balance at June 30, 2019			8,267			$	0.2328 – 8.31			0.32 Years		$	0.9678			$	-

 

		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			2,381,239			$	0.2634 - 1.039			8.86 Years		$	0.2946			$	5,238,080
Options Granted			140,000			$	0.2634 – 2			4.54 Years		$	1.7504			$	160,732
Options Exercised			-				-
Options Cancelled			-				-
Options Expired			-				-
Balance at June 30, 2020			2,521,239			$	0.26342 – 2			8.15 Years		$	0.3170			$	6,512,360

     

Exercisable at December 31, 2019			539,847		$	0.2634 – 1.03938		8.93 Years		$	0.4			$	1,129,786
Exercisable at June 30, 2020			1,040,355		$	0.26342 – 2		8.93 Years		$	0.5359			$	2,459,933

 

Executive Stock Options

 

The Company has 660,119 outstanding executive stock options exercisable at $0.2634 per share as of June 30, 2020 and 299,317 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 24,053 shares of the Company’s common stock under its 2019 Equity Incentive Plan. The stock options have an exercise price of $0.2634 and vest quarterly over a one-year period commencing January 1, 2020. The stock options have a five-year term. A total of 12,027 and 0 stock options were vested as of June 30, 2020 and December 31, 2019, respectively. None of the vested stock options have been exercised and no shares have been issued as of June 30, 2020.

 

On October 25, 2019, the Company granted Nick Noceti, the former Company’s Chief Financial Officer, options to acquire 24,053 shares of the Company’s common stock under its 2019 Equity Incentive Plan. The stock options have an exercise price of $0.2634 and vest quarterly over a two-year period commencing January 1, 2020. The stock options have a five-year term. A total of 6,013 and 0 stock options were vested as of June 30, 2020 and December 31, 2019, respectively. None of the vested stock options have been exercised and no shares have been issued as of June 30, 2020.

 

On October 25, 2019, the Company granted Gary Graham, one of the Company’s directors, options to acquire 24,053 shares of the Company’s common stock under its 2019 Equity Incentive Plan. The stock options have an exercise price of $0.2634 and vest quarterly over a one-year period commencing January 1, 2020. The stock options have a five-year term. A total of 12,027 and 0 stock options were vested as of June 30, 2020 and December 31, 2019, respectively. None of the vested stock options have been exercised and no shares have been issued as of June 30, 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 1,058,328 shares of its common stock at an exercise price of $0.2634. The stock options vest in 36 equal monthly installments of 29,398 shares during the three-year term of his Employment Agreement. 176,388 stock options vested during the six month period ended June 30, 2020. A total of 235,184 and 58,796 stock options were vested as of June 30, 2020 and December 31, 2019, respectively. None of the vested stock options have been exercised and no shares have been issued as of June 30, 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 721,588 shares of its common stock at an exercise price of $0.2634. The stock options vest in 36 equal monthly installments of 20,044 shares during the three-year term of his Employment Agreement. David Gandini was also granted an aggregate of 240,529 additional option shares (the “Pre-Vesting Option Shares”) to vest as follows: (i) 200,439 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 40,090 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. 160,361 stock options vested during the six month period ended June 30, 2020. A total of 400,882 and 240,521 stock options were vested as of June 30, 2020 and December 31, 2019, respectively. None of the vested stock options have been exercised and no shares have been issued as of June 30, 2020 or December 31, 2019.