Stock Options And Warrants

3 Months Ended

Mar. 31, 2021

Stock Options And Warrants

Stock Options and Warrants

12.  STOCK OPTIONS AND WARRANTS

Stock Options

On August 1, 2017, we granted non-qualified stock options to purchase up to 10,000,000 shares of our common stock to a key employee, at an exercise price of $0.01 per share. The stock options vest equally over a period of 36 months and expire August 1, 2022. These options may be exercised on a cashless basis, resulting in no cash payment to the company upon exercise. If the optionee exercises the options on a cashless basis, then the above water value (difference between the option price and the fair market price at the time of exercise) is used to purchase shares of common stock. Under this method, the number of shares of common stock issued will be less than the number of options used to obtain those shares of common stock. During the quarter ended September 30, 2018, the employee exercised, on a cashless basis, 3,324,201 options, resulting in the issuance of 1,233,509 shares of common stock.

On September 18, 2017, we granted non-qualified stock options to purchase up to 1,800,000 shares of our common stock to three key employees, at an exercise price of $0.05 per share. The stock options vest equally over a period of 36 months and expire September 18, 2022. These options were exercisable on a cashless basis, resulting in no cash payment to the company upon exercise. During the year ended December 31, 2019, two of the employees who held 1,200,000 options, collectively, left the company and the options were forfeited, and during the period ended June 30, 2020, a key employee who held 600,000 options left the Company and the options were forfeited.

On January 3, 2018, we granted non-qualified stock options to purchase up to 20,000,000 shares of our common stock to a key employees, at an exercise price of $0.04 per share. The stock options vest equally over a period of 36 months and expire January 3, 2023. These options were exercisable on a cashless basis, resulting in no cash payment to the Company upon exercise. During the year ended December 31, 2020, the key employee left the Company, and the options were forfeited.

On January 17, 2020, we granted non-qualified stock options to purchase up to 283,000,000 shares of our common stock to ten key employees and three directors, at an exercise price of $0.0019 per share. The stock options vest equally over a period of 36 months and expire January 17, 2025. These options allow the optionee to exercise on a cashless basis, resulting in no cash payment to the Company upon exercise, anytime after January 17, 2021.

On June 2, 2020, we granted non-qualified stock options to purchase up to 17,000,000 shares of our common stock to a director, at an exercise price of $0.0018 per share. The stock options vest equally over a period of 36 months and expire June 2, 2025. These options are exercisable on a cashless basis, resulting in no cash payment to the Company upon exercise, anytime after June 2, 2021.

On January 5, 2021, we granted non-qualified stock options to purchase up to 368,000,000 shares of our common stock to six key employees and three directors, at an exercise price of $0.0068 per share. The stock options vest equally over a period of 36 months and expire January 5, 2026. These options are exercisable on a cashless basis, resulting in no cash payment to the Company upon exercise, anytime after January 5, 2022.

The Company used the historical industry index to calculate volatility, since the Company’s stock history did not represent the expected future volatility of the Company’s common stock. The fair value of options granted during the three months ending March 31, 2021 and 2020, were determined using the Black Scholes method with the following assumptions:

	Three months ended			Three months ended
	March 31, 2021			March 31, 2020
Risk free interest rate		0.4	%		1.86	%
Stock volatility factor		337	%		272	%
Weighted average expected option life		5 years			5 years
Expected dividend yield		0	%		0	%

A summary of the Company’s stock option activity and related information follows:

	Three months ended March 31, 2021					Three months ended March 31, 2020
				Weighted				Weighted
				average				average
				exercise				exercise
	Options			price		Options		price
Outstanding - beginning of period		429,675,799		$	0.0052		150,275,799	$	0.016
Granted		368,000,000			0.0068		283,000,000		0.002
Exercised		(10,442,467	)		0.0080		—		—
Forfeited		—			—		—		—
Outstanding - end of period		787,233,332		$	0.0058		433,275,799	$	0.007
Exercisable at the end of period		265,946,574		$	0.0074		163,134,246	$	0.014
Weighted average fair value of
options granted during the period				$	2,502,400			$	509,400

As of March 31, 2021, and December 31, 2020, the intrinsic value of the stock options was approximately $25,365,347 and $1,366,650, respectively. Stock option expense for the three months ended March 31, 2021, and 2020 were $238,634 and $111,248, respectively.

The Black Scholes option valuation model was developed for use in estimating the fair value of traded options, which do not have vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

The weighted average remaining contractual life of options outstanding, as of March 31, 2021 was as follows:

				Weighted
				Average
		Number of		remaining
Exercise		options		contractual
prices		outstanding		life (years)
$	0.0150		35,000,000		1.40
$	0.0131		60,000,000		0.85
$	0.0130		15,000,000		0.97
$	0.0068		368,000,000		4.77
$	0.0053		10,000,000		1.37
$	0.0019		283,233,332		3.80
$	0.0018		17,000,000		4.18
			787,233,332

Warrants

During the fiscal year ended December 31, 2020 the Company issued 20,912,852 warrants through four agreements, related to borrowings, which are exercisable immediately on a cashless basis at prices ranging from $0.005 to $0.0118 per share. As of March 31, 2021 and December 31, 2020, there were 10,912,852 and 20,912,852 warrants outstanding, respectively.

The fair value of warrants granted during the three months ended March 31, 2021 and 2020, were determined using the Black Scholes method with the following assumptions:

	Three months ended			Three months ended
	March 31, 2021			March 31, 2020
Risk free interest rate		0.40	%		—
Stock volatility factor		337	%		—
Weighted average expected warrant life		5 years			—
Expected dividend yield		0	%		—

A summary of the Company’s warrant activity and related information follows:

	Three months ended March 31, 2021					Year Ended December 31, 2020
				Weighted				Weighted
				average				average
				exercise				exercise
	Warrants			price		Warrants		price
Outstanding - beginning of period		20,912,852		$	0.007		10,000,000	$	0.007
Issued		240,000,001		$	0.037		10,912,852	$	0.007
Exercised		(10,000,000	)	$	0.007		—	$	—
Forfeited		—		$	—		—	$	—
Outstanding - end of period		250,912,853		$	0.035		20,912,852	$	0.007
Exercisable at the end of period		250,912,853		$	0.035		20,912,852	$	0.007
Weighted average fair value of
warrants granted during the period				$	983,571			$	98,343

Warrant expense for the three months ended March 31, 2021, and 2020 were $983,571 and zero, respectively.