Common Stock

Shares Issued to Vendors – The Company issued common shares to vendors for services rendered and are expensed based on fair market value of the stock price at the date of grant. For the three months ended March 31, 2017, the Company issued 1,334,167 shares of common stock to vendors and recorded stock compensation expense of $176,621.

The Company amended an agreement with a vendor and issued 400,000 shares of common stock as full and final payment to the vendor on accounts payable owed of $30,000. The fair value of the shares was $56,000, a loss on extinguishment of debt totaling $26,000 was recorded as part of the transaction. In addition, the Company extended the term for an additional six months and agreed to issue 700,000 shares of common stock for services to be rendered. The shares vest in equal installments every two months and will be valued based upon its vesting. 

Shares Issued from Stock Subscription – The Company issued stock subscription to investors. For the three months ended March 31, 2017, the Company issued 2,500,000 common shares for a net proceed of $150,000.

The Company received $20,000 related to the Subscription Receivable that was outstanding as of December 31, 2016.

Stock Options

Effective October 16, 2014, the Company adopted the 2014 Stock Option Plan (the “Plan”) under the administration of the board of directors to retain the services of valued key employees and consultants of the Company.

At its discretion, the Company grants share option awards to certain employees and non-employees, as defined by ASC 718, Compensation—Stock Compensation, under the 204 Stock Option Plan (the “Plan”) and accounts for its share-based compensation in accordance with ASC 718.

A summary of option activity for the three months ended March 31, 2017 is presented below.

On January 10, 2017, the Company approved and granted 5,000,000 non-qualified stock options to employees and 2,000,000 to a Director with an aggregate fair value of $520,718. Each exercisable into one share of our common stock at a price of $0.08 per share and vest 100% in three years from the grant date.

The Company recognized $87,652 in share-based compensation expense for the three months ended March 31, 2017. As of March 31, 2017, total unrecognized stock-based compensation expense was $779,496, which is expected to be recognized as an operating expense through January 2020. The intrinsic value of the stock options outstanding at March 31, 2017 was $169,629.

The fair value of each share option award on the date of grant is estimated using the Black-Scholes method based on the following weighted-average assumptions:

The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected term of the share option award; the expected term represents the weighted-average period of time that share option awards granted are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior; the expected volatility is based upon historical volatility of the Company’s common stock and peers; and the expected dividend yield is based upon the Company’s current dividend rate and future expectations.

Warrants

The Company has the following warrants outstanding as of March 31, 2017 all of which are exercisable:

The intrinsic value of the warrants outstanding at March 31, 2017 was $486,643.