Quarterly report pursuant to Section 13 or 15(d)

STOCK WARRANTS AND STOCK OPTIONS

v3.20.2
STOCK WARRANTS AND STOCK OPTIONS
9 Months Ended
Sep. 30, 2020
STOCK WARRANTS AND STOCK OPTIONS  
NOTE 12. STOCK WARRANTS AND STOCK OPTIONS

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 were 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 September 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 September 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 September 30, 2020 and December 31 2019, respectively. There were 320,000 non-employee detached free-standing stock warrants granted during the nine month period ended September 30, 2020 and 772,261 non-employee detached free-standing stock warrants granted during the nine month period ended September 30, 2019. The relative fair value of these non-employee stock warrants granted during the nine month period ended September 30, 2020 and 2019 totaled $695,454 and $54,535, respectively, and were determined using the Black-Sholes option pricing model based on the following assumptions:

  

 

 

Sept. 30, 2020

 

 

Sept. 30, 2019

 

Exercise Price

 

$ 0.50

 

 

$ 0.06 - 0.2

 

Dividend Yield

 

 

0 %

 

 

0 %

Volatility

 

 

153 %

 

134% - 138

%

Risk-free Interest Rate

 

 

0.29 %

 

1.83% – 2.53

%

Life of Warrants

 

5 Years

 

 

5 Years

 

                         

The following table summarizes the changes in the Company’s outstanding warrants during the nine month period ended September 30, 2020 and 2019, and as of September 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

 

 

772,261

 

 

$0.06 - 0.2062

 

 

4.50 Years

 

$ 0.1231

 

 

$ 161,129

 

Warrants Exercised

 

 

(1,038,339 )

 

$0.06 - 0.5322

 

 

 

 

$ 0.1630

 

 

 

 

 

Warrants Expired

 

 

(1,503 )

 

$ 0.6319

 

 

 

 

$ 0.6319

 

 

 

 

 

Balance at September 30, 2019

 

 

454,097

 

 

$.1330 - 0.1530

 

 

4.55 Years

 

$ 0.1463

 

 

$ 85,158

 

                              

 

 

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

 

 

4.68 Years

 

$ 0.50

 

 

$ 761,600

 

Warrants Exercised

 

 

(454,097 )

 

$

0.13304 - 0.15299

 

 

 

 

$ 0.1451

 

 

 

 

 

Warrants Expired

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2020

 

 

464,317

 

 

$0.50 - 1.039375

 

 

3.91 Years

 

$ 0.66765

 

 

$ 1,027,234

 

               

Exercisable at December 31, 2019

 

 

598,414

 

 

 

$0.13304 – 1.039375

 

 

3.97 Years

 

$ 0.3607

 

 

$ 1,276,870

 

Exercisable at September 30, 2020

 

 

464,317

 

 

 

$0.50 - 1.039375

 

 

3.91 Years

 

$ 0.66765

 

 

$ 1,027,234

 

                         

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 September 30, 2020 and December 31, 2019, the Company granted stock options to acquire 2,541,239 and 2,381,239 shares of common stock under the plan, respectively. As of September 30, 2020, the plan has 1,213,060 vested shares and 1,328,179 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, employees, and certain key consultants. In total for the nine months ended September 30, 2020 and 2019, the Company recorded $343,549 and none, respectively, of share-based compensation expense related to the stock options. The unrecognized compensation expense as of September 30, 2020 was approximately $358,000 for non-vested share-based awards to be recognized over periods of approximately three to seven years.

  

In applying the Black-Scholes options-pricing model, assumptions used to compute the fair value of the stock options granted during the nine month period ended September 30, 2020 and 2019 were as follows:

 

 

 

September 30, 2020

 

 

September 30,

2019

 

Exercise Price

 

$0.26-3.30

 

 

 

-

 

Dividend Yield

 

 

0 %

 

 

-

 

Expected Volatility

 

153%-171

%

 

 

-

 

Risk Free Interest Rate

 

0.19%-0.43

%

 

 

-

 

Expected Life

 

2.2-5 years

 

 

 

-

 

                         

The following table summarizes the changes in the Company’s outstanding stock options during the nine month period ended September 30, 2020 and 2019, and as of September 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 September 30, 2019

 

 

8,267

 

 

$0.2328 – 8.31

 

 

0.07 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

 

 

160,000

 

 

$0.2634 – 3.30

 

 

4.10 Years

 

$ 1.9454

 

 

$ 149,532

 

Options Exercised

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

Options Cancelled

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

Options Expired

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2020

 

 

2,541,239

 

 

$0.26342 – 3.30

 

 

7.86 Years

 

$

0.3987

 

 

$

6,305,579

 

                          

Exercisable at December 31, 2019

 

 

539,847

 

 

 

$0.2634 – 1.03938

 

 

8.93 Years

 

$ 0.4

 

 

$ 1,129,786

 

Exercisable at September 30, 2020

 

 

1,213,060

 

 

 

$0.26342 – 3.30

 

 

8.21 Years

 

$ 0.5009

 

 

$ 2,885,963

 

                                     

Executive Stock Options

 

The Company has 829,492 outstanding executive stock options exercisable at $0.2634 per share as of September 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 18,040 and 0 stock options were vested as of September 30, 2020 and December 31, 2019, respectively. None of the vested stock options have been exercised and no shares have been issued as of September 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 9,020 and 0 stock options were vested as of September 30, 2020 and December 31, 2019, respectively. None of the vested stock options have been exercised and no shares have been issued as of September 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 18,040 and 0 stock options were vested as of September 30, 2020 and December 31, 2019, respectively. None of the vested stock options have been exercised and no shares have been issued as of September 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. A total of 323,378 and 58,796 stock options were vested as of September 30, 2020 and December 31, 2019, respectively. None of the vested stock options have been exercised and no shares have been issued as of September 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. A total of 461,014 and 240,521 stock options were vested as of September 30, 2020 and December 31, 2019, respectively. None of the vested stock options have been exercised and no shares have been issued as of September 30, 2020 or December 31, 2019.