4. COMMON STOCK

12 Months Ended

Dec. 31, 2018

Equity [Abstract]

COMMON STOCK

4.     COMMON STOCK

At December 31, 2018, the Company’s authorized capital stock was 150,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share. On that date, the Company had outstanding 46,440,765 shares of common stock, and no shares of preferred stock outstanding.

2018 Transactions: During the year ended December 31, 2018, the Company issued shares of common stock as follows:

· 200,000 shares were issued as a result of the exercise of a warrant with an exercise price of $0.50 for a total of $100,000 in cash proceeds.

· 130,000 shares of common stock were issued for stock-based compensation to a consultant for services earned and unearned (see within Note 4 related to July 2018 grant of 130,000 shares to consultant for further discussion).

· 2,440,000 shares of common stock were issued for vested stock grants to various employees and consultants.

At December 31, 2017, the Company's authorized capital stock was 150,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share. On that date, the Company had outstanding 43,670,765 shares of common stock, and no shares of preferred stock outstanding.

2017 Transactions: During the year ended December 31, 2017, the Company issued shares of common stock as follows:

· 210,000 shares of common stock issued to employees as signing bonuses with a fair value of $91,800.

· 75,000 shares of common stock issued to the Company’s Board of Advisors with a fair value of $12,882.

· 200,000 shares of common stock issued as a result of the exercise of a warrant with an exercise price of $0.25 for total of $50,000 in cash proceeds.

Stock, Options and Warrant Grants:

In October 2018, we granted to several employees of 3PEA a total of 1,050,000 shares of common stock. These shares were valued at $3,405,000 or average price per share of $3.24. The 1,050,000 shares have an annual vesting period of five years with the first vesting period occurring on October 2019. The amount expensed related to this grant for the year ended December 31, 2018 totaled $131,648. As of December 31, 2018, none of the shares have vested and/or issued.

On August 7, 2018, we granted an employee of 3PEA options to purchase 500,000 shares of common stock exercisable for five years at $3.39 per share, which vest annually over a five-year period from the date of hire. The options were valued at $1,315,011 using the Black-Scholes options pricing model under the following assumptions: stock price at issuance of $3.39 per share; exercise price of $3.39; 5 year life; discount rate of 2.95%; and volatility rate of 263%. The amount expensed of this grant for the year ended December 31, 2018 totaled $100,547. As of December 31, 2018 none of the options have vested or been exercised.

On July 18, 2018, we granted stock options for various employees of 3PEA to purchase 750,000 shares of common stock exercisable for five years with an exercise price of $2.40 per share, which vest annually over a five-year period, as long as they remain employed with 3PEA, beginning July 18, 2018. The options were valued at $1,397,777 using the Black-Scholes options pricing model under the following assumptions: stock price at issuance of $2.40 per share; exercise price of $2.40; 5 year life; discount rate of 2.88%; and volatility rate of 235%. The amount expensed related to this grant for the year ended December 31, 2018 totaled $123,561. As of December 31, 2018 none of the options have vested or been exercised.

In July 2018, we granted 130,000 shares to a consultant. The shares were valued at $338,000 or $2.60 per share. The 130,000 shares will be expensed over the contract period of one year. The value earned and expensed for the year ended December 31, 2018 was $144,140. As of December 31, 2018, the full 130,000 shares have been issued (see Note 4 Common Stock – 2018 Transactions) and the unearned portion totaling $193,410 has been recorded as contra equity and included in additional paid-in capital.

On May 3, 2018, we appointed Dan R. Henry to our board of directors as an independent director. In connection with his appointment, we issued Mr. Henry options to purchase 1,500,000 shares common stock exercisable over five years with an exercise price of $1.34 per share, which vest over a four-year period from the date of his appointment. The options were valued at $1,574,691 using the Black-Scholes options pricing model under the following assumptions: stock price at issuance of $1.34 per share; exercise price of $1.34; 5 year life; discount rate of 2.94%; and volatility rate of 238%. The amount expensed related to this grant for the year ended December 31, 2018 totaled $262,250. As of December 31, 2018 none of the options have vested or been exercised.

On May 3, 2018, we appointed Dennis Triplett to our board of directors as an independent director. In connection with his appointment, we granted Mr. Triplett 200,000 shares of restricted common stock which vest over a four-year period from the date of his appointment. The shares have a fair market value of $268,000 or $1.34 per share. The amount vested and expensed of this grant for the year ended December 31, 2018 totaled $48,415. As of December 31, 2018 none of the shares have been issued.

On April 13, 2018, we appointed Quinn Williams to our board of directors as an independent director. In connection with his appointment, we granted Mr. Williams 200,000 shares of restricted common stock which vest over a four-year period from the date of his appointment. The shares have a fair market value of $320,000 or $1.60 per share. The amount vested and expensed of this grant for the year ended December 31, 2018 totaled $57,338. As of December 31, 2018 none of the shares have been issued.

On March 29, 2018, we appointed Bruce A. Mina to our board of directors as an independent director. In connection with his appointment, we granted Mr. Mina 200,000 shares of restricted common stock which vest over a four-year period from the date of his appointment. The shares have a fair market value of $234,000 or $1.17 per share. The amount vested and expensed of this grant for the year ended December 31, 2018 totaled $43,875. As of December 31, 2018 none of the shares have been issued.

In January 2018, the Company granted 990,000 shares of restricted common stock to certain employees of 3PEA with a fair market value of $698,000 with a range of $0.67 to $0.74 per share. The 990,000 shares have an annual vesting period of five years with the first vesting period occurring on December 31, 2018. The amount vested and expensed of this grant for the year ended December 31, 2018 totaled $133,597. As of December 31, 2018, none of the shares have been issued.

In January 2018, we granted 300,000 shares of restricted common stock to a consultant of 3PEA with a fair market value of $213,000, or $0.71 per share. The 300,000 shares have an annual vesting period of three years with the first vesting period occurring on December 31, 2018. The amount vested and expensed of this grant for the year ended December 31, 2018 totaled $71,000. As of December 31, 2018, none of the shares have been issued.

In July 2017, we granted 200,000 shares of restricted common stock to an officer of 3PEA with a fair market value of $84,400 or $0.42 per share. These shares have been issued. Concurrently, the Company also granted the employee four equal tranches of 200,000 restricted common shares, each valued at $84,400 which will vest in equal amounts over a four year period on the last day of each quarter, commencing December 31, 2017. The amount vested and expensed of this grant for the years ended December 31, 2018 and 2017 totaled $84,400 and $42,200, respectively. 200,000 shares subject to vesting restrictions have been issued as of December 31, 2018.

In November 2016, we granted a total of 5,000,000 shares to certain officers and directors of 3PEA with a total value of $787,950 or $0.15759 per share (including a 15% discount of fair market value due to these shares being restricted and lacking market liquidity). The 5,000,000 shares have a quarterly vesting period of five years with the first vesting period occurring on December 31, 2016. The value vested and expensed for the years ended December 31, 2018 and 2017 was $153,650 and $157,590 respectively. As of December 31, 2018, 2,000,000 shares have been issued.

In November 2016, we granted 210,000 shares to a consultant. The shares were valued at $33,094 or $0.15759 per share (including a 15% discount of fair market value due to these shares being restricted and lacking market liquidity). The 210,000 shares have a quarterly vesting period of three years with the first vesting period occurring on December 31, 2016. The value vested for the years ended December 31, 2018 and 2017 was $11,031 and $11,031, respectively. As of December 31, 2018, 140,000 shares have been issued.

Stock Options

A summary of stock options activity for the year ended December 31, 2018 is presented as follows:

						Weighted-
				Weighted-		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Shares			Price		Term (Years)		Value
Outstanding at December 31, 2017	–
Granted		2,750,000		$	2.00		–	$	–
Exercised		–			–		–		–
Forfeited/expired		(42,673	)		2.40		–		–
Outstanding at December 31, 2018		2,707,327		$	2.00		4.56	$	5,402,585
Exercisable at December 31, 2018		–		$	–		–	$	–

A summary of unvested options activity for the year ended December 31, 2018 was as follows:

				Weighted-
				Average
				Grant Date
	Shares			Fair Value
Unvested at December 31, 2017		–		$	–
Granted		2,750,000			2.00
Forfeited/expired		(42,673	)		2.40
Vested		–			–
Unvested at December 31, 2018		2,707,327		$	2.00

The weighted average grant date fair value of options granted and the total intrinsic value of options exercised for the year ended December 31, 2018 is as follows:

	2018
Weighted average grant date fair value of options granted	$	1.56
Intrinsic value of options exercised	$	–

Restricted Stock

A summary of restricted stock activity for the year ended December 31, 2018 and 2017 was as follows:

				Weighted-
				Average Grant
	Shares			Date Fair Value
Outstanding at December 31, 2016		4,960,000		$	0.16
Granted		1,000,000			0.42
Vested		(1,320,000	)		0.17
Outstanding at December 31, 2017		4,640,000			0.20
Granted		3,070,000			1.78
Forfeited		(275,000	)		0.16
Vested		(1,400,000	)		0.18
Outstanding at December 31, 2018		6,035,000		$	0.94