15.

Stock Options and Grants

A summary of stock option activity and changes during the years ended December 31, 2017 and 2016 is presented below. The table includes options granted to employees and directors of the Company and does not include 50,000 options granted to a consultant during 2017, as described below:

	Shares			Weighted Average Fair Value Per Share			Weighted Average Exercise Price Per Share			Weighted Average Remaining Terms (in years)		Aggregate Intrinsic Value
Outstanding – January 1, 2016 Predecessor		15,425,001			0.07			0.30			7.00		-
Granted		-			-			-
Exercised		-			-			-
Cancelled		(15,425,001	)		(0.07	)		(0.30	)
Outstanding – June 30, 2016 Predecessor		-			-			-			-		-
Granted		295,051			1.25			3.00
Exercised		-			-			-
Cancelled
Outstanding – December 31, 2016 - Successor		295,051		$	1.25		$	3.00			-	$	-
Granted		598,552			1.22			4.28
Exercised		(2,803	)
Cancelled		(2,408	)
Outstanding – December 31, 2017 - Successor		888,392			1.23			3.86			9.15	$	1,881,869
Exercisable – December 31, 2016		128,299			1.25			3.00			9.86		-
Exercisable – December 31, 2017		738,608		$	1.22		$	4.04			9.19	$	1,435,515

Predecessor

Prior to the Effective Date, the Company had stock plans approving the issuance of shares of the Company’s common stock. In connection with the Plan, all of the outstanding stock options under such plans were cancelled.

For the six months ended June 30, 2016, the Company recognized stock-based compensation of $119,146 which is included in payroll and related expenses in the accompanying consolidated statements of operations.

Successor

On October 26, 2016, the Company’s Board of Directors approved the issuance of up to 500,000 shares of the Company’s common stock in the form of restricted stock or options (“2016 Stock Plan”). Effective January 20, 2017, the 2016 Stock Plan was amended and restated as the SG Blocks, Inc. Stock Incentive Plan (the “Incentive Plan”). The Incentive Plan authorizes the issuance of up to 1,500,000 shares of common stock. It authorizes the issuance of equity-based awards in the form of stock options, stock appreciation rights, restricted shares, restricted share units, other share-based awards and cash-based awards to non-employee directors and to officers, employees and consultants of the Company and its subsidiary, except that incentive stock options may only be granted to the Company’s employees and its subsidiary’s employees. The Incentive Plan expires on October 26, 2026, and is administered by the Company’s Compensation Committee of the Board of Directors. Each of the Company’s employees, directors, and consultants are eligible to participate in the 2016 Stock Plan. As of December 31, 2017, there were 561,608 shares of common stock available for issuance under the 2016 Stock Plan.

For the year ended December 31, 2017 and the six months ended December 31, 2016, the Company recognized stock-based compensation expense of $701,402 and $188,343, respectively, which is included in payroll and related expenses in the accompanying consolidated statements of operations.

As of December 31, 2017, there was $208,576 of total unrecognized compensation costs related to non-vested stock options, which will be expensed over a weighted average period of 1.18 years. The intrinsic value is calculated as the difference between the fair value of the stock price at year end and the exercise price of each of the outstanding stock options. The fair value of the stock price at December 31, 2017 was $5.98 per share.

On November 1, 2016, Mahesh Shetty, the Company’s Chief Financial Officer, and two employees of the Company were granted options to purchase 21,839 and an aggregate of 54,596, respectively, shares of the Company’s common stock with an exercise price of $3.00 per share. These options were granted under the 2016 Stock Plan. These options vest at various dates through November 1, 2018 in accordance with the underlying agreement. The fair value of these options upon issuance amounted to $95,390.

On November 1, 2016, Paul Galvin, the Company’s Chief Executive Officer, Stevan Armstrong, the Company’s Chief Technology Officer and four directors of the Company, including Mr. Shetty, were granted options to purchase 111,607, 43,677 and an aggregate of 63,335, respectively, shares of the Company’s common stock with an exercise price of $3.00 per share. These options were granted under the 2016 Stock Plan. These options vest at various dates throughout November 1, 2019 in accordance with the underlying agreement. The fair value of these options upon issuance amounted to $272,834.

On January 30, 2017, the Company granted Mr. Galvin, Mr. Armstrong, Mr. Shetty, and three employees of the Company options to purchase 96,814, 34,481, 69,038 and an aggregate of 47,010, respectively, shares of the Company’s common stock with an exercise price of $3.00 per share. These options were granted pursuant to the 2016 Stock Plan. These options vest in equal quarterly installments over a two year period and will fully vest by the end of December 2018, in accordance with the underlying agreement. The fair value of these options upon issuance amounted to $316,599.

In March 2017, Mr. Galvin and Mr. Shetty, were granted options to purchase 185,425 and 132,446 shares of the Company’s common stock, respectively. The exercise price of such options was contingent on the offering price of the Public Offering and based on the $5.00 Public Offering Price. 185,425 of such options have an exercise price of $5.00 per share and 132,446 have an exercise price of $6.00 per share. These options vested during the three months ended September 30, 2017, when certain performance conditions were met. The fair value of these options upon issuance amounted to $370,558.

Also in March 2017, the Company issued options to purchase an aggregate of 33,334 shares of the Company’s common stock to two directors. Such options have an exercise price of $3.00 per share, and vest in quarterly installments, in accordance with the underlying agreement. The fair value of these options upon issuance amount to $42,934.

Non-Employee Stock Options

In September 2017, in connection with an advisory agreement entered into by the Company (the “Advisory Agreement”), a consultant was granted options to purchase 50,000 shares of the Company’s common stock, with an exercise price of $6.25. The options vest when certain performance conditions are met. These performance conditions consist of the purchase of fifty modular units from the Company by qualified customers. As of December 31, 2017, these options have not vested.

The fair value of the stock-based option awards granted during the year ended December 31, 2017 were estimated at the date of grant using the Black-Scholes option valuation model with the following assumptions:

	2017
Expected dividend yield		0	%
Expected stock volatility		25.5 - 44	%
Risk-free interest rate		1.78 - 2.11	%
Expected life		5.5

Because the Company does not have significant historical data on employee exercise behavior, the Company uses the “Simplified Method” to calculate the expected life of the stock-based option awards granted to employees. The simplified method is calculated by averaging the vesting period and contractual term of the options.