Share-Based Compensation

9 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

SHARE-BASED COMPENSATION

2. SHARE-BASED COMPENSATION

Share-Based Compensation

For the nine months ended September 30, 2019 and 2018, share-based compensation expense totaled approximately $1,937,000 and $445,000, respectively.

There was no related income tax benefit recognized because our deferred tax assets are fully offset by a valuation allowance.

We determine the fair value of option grant share-based awards at their grant date, using a Black-Scholes-Merton Option-Pricing Model applying the assumptions in the following table:

	nine months ended September 30,
	2019	2018
Expected life (years)	5.50-6.75	N/A
Dividend yield	-	N/A
Expected volatility	232%	N/A
Risk free interest rates	2.47%	N/A
Weighted average fair value of options at grant date	$0.34	N/A

For the nine months ended September 30, 2019, 6,650,000 options to purchase stock were granted and 1,500,000 options were forfeited, additionally, no options to purchase stock were exercised or expired and 75,000 restricted stock awards were granted; no restricted stock units were granted, vested or forfeited. At September 30, 2019, options to purchase 32,900,000 shares of common stock were outstanding with a weighted average exercise price of $0.152, a weighted average remaining contract term of approximately 6.7 years with an aggregate intrinsic value of $3,092,000. At September 30, 2019 options for 17,010,000 shares were exercisable.

As of September 30, 2019, there was approximately $2,009,000 of unrecognized compensation cost related to unvested stock options granted and outstanding, net of estimated forfeitures. The cost is expected to be recognized on a weighted average basis over a period of approximately one year.

During the nine months ended September 30, 2019, the company received $2,150,000 in proceeds from the issuance of notes payable, maturing in September 2019, with which the company also issued warrants to purchase 1,075,000 shares of the company's common stock, par value $0.001 per share at an exercise price of $0.07 per share for two years from the date of issuance. The notes bear interest of 10% payable at maturity. On maturity date, the company may elect to convert $850,000 of the balance of principal and interest due into shares of common stock at the conversion price of $0.10 a share. Also, under an Asset Purchase Agreement, dated as of May 24, 2019, by and between the company and Applied Optical Sciences, Inc., an Arizona corporation which is majority owned by the holder of in excess of 10% of the company's common stock, we issued warrants to purchase 2,500,000 shares of the company's common stock, par value $0.001 per share at an exercise price of $0.06 per share for ten years from the date of issuance.