|6 Months Ended|
Jun. 30, 2019
NOTE 9 - SHAREHOLDERS' DEFICIT
Sale of common stock
In connection with a subscription agreement dated April 23, 2019, during the three months ended June 30, 2019, the Company received cash proceeds of $300,000 from an investor for the purchase of 2,000,000 shares of the Company's common stock at $0.15 per share.
Issuance of common shares for services
On March 12, 2019, the Company entered into a consulting agreement for advisory services to be rendered that ends on June 30, 2019. In connection with this consulting agreement, the Company issued 485,060 restricted vested common shares of the Company to a consultant for services to be rendered. These shares were valued at $82,460, or $0.17 per common share, based on quoted closing price on the date of grant. In connection with this consulting agreement, during the six months ended June 30, 2019, the Company recorded stock-based professional fees of $82,460.
On March 14, 2019, the Company entered into an Advisory Board Agreement and a related Restricted Stock Award Agreement with an advisor (the "Advisor") to act as a member of the Company's advisory board. The Advisory Board Agreement has a term of one year and will renew automatically unless terminated by either party. In connection with this advisory agreement, the Company issued 200,000 restricted common shares of the Company to the Advisor under its 2018 Long Term Incentive Plan. These shares will vest on the first anniversary date of the Restricted Stock Award Agreement. If the Advisor's employment is terminated for any reason, these shares will immediately be forfeited. In the event of a change of control, the employee shall be 100% vested in all shares of restricted shares subject to these Agreements. These shares were valued at $32,000, or $0.16 per common share, based on quoted closing price on the date of grant. In connection with this Advisory Board Agreement, during the six months ended June 30, 2019, the Company recorded stock-based professional fees of $9,333 and at June 30, 2019 and prepaid expenses of $22,667, which will be amortized over the remaining one-year vesting period.
On May 20, 2019, the Company entered into a six-month consulting agreement with an individual for business development services. In connection with this consulting agreement, the Company issued 500,000 restricted common shares of the Company to the consultant. These shares vest immediately. These shares were valued at $47,000, or $0.094 per common share, based on quoted closing price on the date of grant. In connection with this consulting agreement, the Company recorded stock-based professional fees of $9,792 and prepaid expenses of $37,208, which will be amortized over the remaining service period.
The following table summarizes activity related to non-vested shares:
During the six months ended June 30, 2019 and 2018, aggregate accretion of stock-based compensation expense on previously granted non-vested shares amounted to $1,429,167 and $0, respectively. Total unrecognized compensation expense related to these unvested common shares at June 30, 2019 amounted to $322,915 which will be amortized over the remaining vesting period.
Common share exercise compensation
As compensation for services commencing on February 1, 2016 and continuing through February 14, 2019, on December 27, 2016, the Company granted a stock option exercise right to an employee of the Company, whereby the employee will received a credit of $5,000 per month towards the cash required to exercise his 750,000 options at $0.31 per share. Accordingly, the employee can exercise options on a cashless basis up to the amount he has been credited. As of June 30, 2019 and December 31, 2018, the employee was credited $182,500 and $175,000 towards the options exercise, respectively. No cash disbursement will be required by the Company under this provision. The Company recognized compensation expense of $7,500 and $30,000 during the six months ended June 30, 2019 and 2018, respectively, with a corresponding increase to shareholders' equity.
For the six months ended June 30, 2019 and 2018, the Company recorded $1,042,506 and $2,503,788 of compensation expense related to stock options, respectively. Total unrecognized compensation expense related to unvested stock options at June 30, 2019 amounted to $1,350,254. The weighted average period over which stock-based compensation expense related to these options will be recognized is approximately 1.3 years.
Stock option activities for the six months ended June 30, 2019 are summarized as follows:
On March 14, 2019, the Company entered into a letter agreement ("Letter Agreement") with Dinosaur Financial Group, LLC ("Dinosaur"), to act as the Company's financial advisor and agent for raising investment capital through a private placement (or pursuant to an alternate form of capital investment or capital transaction). For services rendered under the Letter Agreement, Dinosaur shall receive cash fees of up to seven percent of funds raised and the Company shall sell to Dinosaur, and Dinosaur shall purchase from the Company, for $0.001 per each share of common stock covered, warrants to purchase an equal proportion of warrants to the number of shares issued or issuable to investors in the private placement. Additionally, per the terms of the Letter Agreement, upon signing of the agreement, the Company shall sell to Dinosaur, and Dinosaur shall purchase from the Company for $0.001 per each share of common stock covered, warrants (the "Warrants") to purchase 1,000,000 shares of C-Bond Common Stock, granted in three successive tranches as outlined below, with an exercise price of $0.18 or current market price at the time, whichever is lower, as set forth in the Letter Agreement. Upon signing of the Letter Agreement, Dinosaur received Warrants to purchase 200,000 shares of the Company's common stock at $0.18 per share. On June 14, 2019, the three-month anniversary of the Letter Agreement, Dinosaur received Warrants to purchase 400,000 shares of the Company's common stock at $0.08 per share. On the six-month anniversary of the Letter Agreement, Dinosaur will receive Warrants to purchase 400,000 shares of the Company's common stock. The Warrants shall be exercisable over a five-year term from date each tranche date and shall be assignable to others at Dinosaur's discretion. In the event either party terminates the Letter agreement before the three or six month anniversary, the Company has no obligation to sell the common stock or related Warrants referenced herein.
The warrants were valued at the grant date using a Black-Scholes option pricing model with the following assumptions; risk-free interest rate of 2.43%, expected dividend yield of 0%, expected warrant term of five years, and an expected volatility of 275.0%. The aggregate grant date fair value of these awards amounted to $159,700. The Company recognizes compensation cost for unvested stock-based warrant awards on a straight-line basis over the requisite service period. For the six months ended June 30, 2019 and 2018, the Company recorded $133,457 and $0 of stock-based professional fees related to stock warrants, respectively. Total unrecognized professional fee expense related to unvested stock warrants at June 30, 2019 amounted to $26,243. The weighted average period over which stock-based professional fees related to these warrants will be recognized is approximately 0.34 years.
Warrant activities for the six months ended June 30, 2019 are summarized as follows:
2018 Long-term Incentive Plan
On June 7, 2018, a majority of the Company's shareholders and its board approved the adoption of a 2018 Long-Term Incentive Plan (the "2018 Plan"). The purpose of the 2018 Plan is to advance the interests of the Company, its affiliates and its stockholders and promote the long-term growth of the Company by providing employees, non-employee directors and third-party service providers with incentives to maximize stockholder value and to otherwise contribute to the success of the Company and its affiliates, thereby aligning the interests of such individuals with the interests of the Company's stockholders and providing them additional incentives to continue in their employment or affiliation with the Company. The Plan was adopted on June 7, 2018 and effective on August 2, 2018. Under the 2018 Plan, the Plan Administrator may grant:
An award granted under the 2018 Plan must include a minimum vesting period of at least one year, provided, however, that an award may provide that the award will vest before the completion of such one-year period upon the death or qualifying disability of the grantee of the award or a change of control of the Company and awards covering, in the aggregate, 25,000,000 shares of our Common Stock may be issued without any minimum vesting period.
The aggregate number of shares of common stock and number of shares of the Company's common stock that may be subject to incentive stock options granted under the 2018 Plan is 50,000,000 shares, of which 11,445,698 shares have been issued or granted under incentive stock options and 3,450,000 shares of restricted stock have been issued as of June 30, 2019. All shares underlying grants are expected to be issued from the Company's unissued authorized shares available.
The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef