Quarterly report pursuant to Section 13 or 15(d)

Employee Stock Options

v3.10.0.1
Employee Stock Options
9 Months Ended
Sep. 30, 2018
Employee Stock Options [Abstract]  
EMPLOYEE STOCK OPTIONS
11. EMPLOYEE STOCK OPTIONS

 

On September 26, 2018, upon approval of the Company’s board of directors, the Company granted outside its 2015 Equity Plan, 6,000,000 options to five management employees and four directors. Jay Nussbaum was issued 2,350,000 options, Felicia Hess was issued 1,000,000 options, Daniyel Erdberg was issued 1,000,000 options, Kendall Carpenter was issued 425,000 options, Reginald Brown, Jr. was issued 1,000,000 options. Director David Aguilar was issued 150,000 options and Directors John Miller, Timothy Hoechst and Robert Guerra were each issued 25,000 options. The options vest upon the Company receiving an aggregate of $4,000,000 in new orders from a prime government contractor or directly from the U.S. government at any time commencing after the date of issuance. The options are exercisable at an exercise price of $.65 per share and expire September 26, 2022. Of these 6,000,000 options, 5,000,000 options have been accounted for as a modification of the August 22, 2018 options. During the nine months ended September 30, 2018, $360,593 compensation expense was recognized on these 6,000,000 options with a remaining balance of $2,238,087 to be recognized over the assumed vesting period.

 

On August 22, 2018, upon approval of the Company’s board of directors, the Company granted outside its 2015 Equity Plan, an aggregate of 5,000,000 options to five management employees and four directors. Included in this award were the following grants to Executive Officers and Directors of the Company: 1,950,000 options to Jay Nussbaum, Chief Executive Officer and Chairman of the Board of Directors, 800,000 options to Felicia Hess, Chief Operating Officer, 800,000 options to Daniyel Erdberg, President, 300,000 options to Kendall Carpenter, Chief Financial Officer and the following directors of the Company: 150,000 options to David Aguilar, 25,000 options to John Miller, 25,000 options to Timothy Hoechst and 25,000 options to Robert Guerra. The options vest upon the Company receiving an aggregate of $4,000,000 in new orders from a prime government contractor or directly from the U.S. government at any time commencing after the date of issuance. The options are exercisable at an exercise price of $1.00 per share and expire August 22, 2022. On September 26, 2018, the Board resolved to cancel the Options to purchase 5,000,000 shares of common stock issued on August 22, 2018 that had not vested.

 

On May 16, 2018, upon approval of the Company’s board of directors, the Company granted outside its 2015 Equity Plan, 460,000 options to four employees. Reginald Brown, Jr. was issued 200,000 options and Kendall Carpenter was issued 130,000 options which were immediately vested, are exercisable at an exercise price of $1.00 per share and expire May 16, 2022. Two engineers received a total of 130,000 shares which vest 50% after one year and the remaining 50% after two years, are exercisable at an exercise price of $1.00 per share and expire May 16, 2022. During the nine months ended September 30, 2018, $165,354 compensation expense was recognized on these 460,000 options with a remaining balance of $36,727 to be recognized over the vesting period.

 

On March 28, 2018, upon approval of the Company’s board of directors, the Company granted outside its 2015 Equity Plan, 100,000 options each to a newly-appointed director, Robert Guerra. These options vest 50% one year after the date of grant and the remaining 50% two years after the date of grant provided the director is still actively involved with the Company. The options are exercisable at an exercise price of $1.00 per share and expire on March 28, 2022. During the nine months ended September 30, 2018, $14,599 compensation expense was recognized on these 100,000 options with a remaining balance of $23,990 to be recognized over the vesting period.

 

On December 13, 2017, upon approval of the Company’s board of directors, the Company issued outside its 2015 Equity Plan, 100,000 options each to two newly-appointed directors, or a total of 200,000 options. These options vest 50% after one year and the remaining 50% after two years provided the director is still actively involved with the Company. The options are exercisable at an exercise price of $1.00 per share and expire on December 13, 2021. During the nine months ended September 30, 2018 and twelve months ended December 31, 2017, $54,638 and $3,593, respectively, compensation expense was recognized on these 200,000 options with a remaining balance of $41,558 to be recognized over the vesting period.

 

During 2016, the Company granted 10,000 options to an employee with two-year vesting and an exercise price of $3.00 and an expiration date of December 6, 2019. The Company recognized $1,105 in compensation for the nine months ended September 30, 2018. No additional compensation will be recognized on these options which were cancelled due to the termination of the employee. 

 

On June 1, 2015, the Company issued an option award to an employee for 37,500 shares vesting over three years with an exercise price of $10.80 and expiration date of May 4, 2019. During the nine months ended September 30, 2018, $14,369 compensation expense was recognized on these 37,500 options which have been cancelled due to the termination of the employee.

 

On January 9, 2017, the Company issued an option to purchase 100,000 shares of common stock with an exercise price of $2.90 per share to a director. The option vests 50,000 after one year from grant date and another 50,000 two years from grant date with an expiration date of four years from grant date provided that the Director is still providing service to the Company. During the nine months ended September 30, 2018, $33,836 compensation expense was recognized on these 100,000 options with a remaining balance of $11,280 to be recognized over the vesting period.

 

The Company used the Black-Scholes option pricing model to estimate the fair value on the date of grant of the 6,560,000 options granted during the nine months ended September 30, 2018.

    

The following table summarizes the assumptions used to estimate the fair value of the 11,560,000 stock options granted during the nine months ended September 30, 2018 on the date of grant.

 

      2018  
         
  Expected dividend yield     0 %
  Expected volatility     80-97 %
  Risk-free interest rate     2.48-2.89 %
  Expected life of options     4.00 years

 

 

Under the Black-Scholes option pricing model, the fair value of the 11,560,000 options granted during the nine months ended September 30, 2018 is estimated at $2,839,360 on the date of grant. During the nine months ended September 30, 2018, $540,546 compensation expense was recognized on these 11,560,000 options.

 

The following table represents stock option activity as of and for the nine months ended September 30, 2018:

 

      Number of Options     Weighted 
Average
Exercise Price per Share
    Weighted
Average
Contractual
Life in
Years
    Aggregate Intrinsic
Value
 
  Outstanding – December 31, 2017     7,945,000     $ 1.38       3.50          
  Exercisable – December 31, 2017     7,627,500     $ 1.35       3.50     $              0  
  Granted     11,560,000     $ 0.82                  
  Cancelled or Expired     (5,425,000 )   $ 1.33                  
  Outstanding – September 30, 2018     14,080,000     $ 0.94       3.39     $ 0  
  Exercisable – September 30, 2018     7,600,000     $ 1.15       2.92     $ 0