Stock Options, Incentive Plans, Stock Awards, and Employee Benefit Plan

Stock Option Plans: The Company’s 2015 Equity Incentive Plan provides for the grant of incentive stock options as defined in Section 422 of the Internal Revenue Code and the grant of Stock Options, Restricted Stock, Restricted Stock Units, Performance Awards, or other Awards to employees, non-employee directors, and consultants. The Board of Directors has authorized 5,000,000 shares of common capital stock for issuance under the 2015 Stock Incentive Plan, including automatic increases provided for in the 2015 Equity Incentive Plan through fiscal year 2025. The number of shares of common stock reserved for issuance under the 2015 Equity Incentive Plan will automatically increase, with no further action by the stockholders, on the first business day of each fiscal year during the term of the Plan, beginning January 1, 2016, in an amount equal to 5% of the issued and outstanding shares of common stock on the last day of the immediately preceding year, or such lesser amount if so determined by the Board or the Plan Administrator. During 2017, the Company granted 1,695,334 restricted shares of stock to employees, officers and directors. During 2017, the Company granted 66,667 restricted stock units to one director and 105,000 restricted stock units to employees either as a new hire bonus, or performance bonus.

Treasury Stock: During 2017, the Company purchased 56,973 shares with a value of $89,250 to cover the employee’s and director’s share to tax liabilities related to stock grants maturing on December 27, 2016. The Company also purchased 19,379 shares of common stock with a value of $23,760 through Wedbush under an agreement where shares were purchased at market at the discretion of Wedbush.

Stock Awards: The Company has granted restricted stock awards to its employees at different periods from 2005 through 2017. The majority of the shares granted to those employees vest 10 years from the grant date, and is forfeited in the event that the recipient’s employment relationship with the Company is terminated prior to vesting.

The Company granted 300,000 shares of common stock with a 10 year vesting period to Vaden Landers as a part of his employment agreement. The Company granted 1,395,334 shares of stock to employees and directors as a performance bonus. Executive offices included in the grant were Louis Hoch (300,000 shares) and Tom Jewell (150,000 shares).

The Company entered into a Director’s agreement with Brad Rollins in 2017 where the director received 66,667 restricted stock units, pursuant and subject to the terms of the Company’s 2015 Equity Incentive Plan. The initial 22,223 shares vests on May 1, 2018, the second installment of 22,222 shares vesting on May 1, 2019, and the third installment of 22,222 shares vests on May 1, 2020. During 2017, a portion of the restricted stock awards were granted, but not issued and are not listed as outstanding in the financial statements for 2017. Stock-based compensation expense related to stock options and restricted stock awards was $968,141 for 2017 and $968,141 for 2016.

A summary of stock awards outstanding and 2017 activities are as follows:



Stock Awards	Shares	Weighted Average Exercise Price		Weighted Average Contractual Remaining Life	Aggregate Intrinsic Value
Outstanding, December 31, 2016	3,361,276	$	1.85
Granted	1,695,334	2.23
Vested	36,674	—
Forfeited	—	—

Outstanding, December 31, 2017	5,019,936	$	1.98	8.51	$	2,773,236

Expected to Vest after December 31, 2017	5,019,936	$	1.98	8.51	$	2,773,236

As of December 31, 2017, there were $7,012,544 of unrecognized compensation costs related to the un-vested share-based compensation arrangements granted. The cost is expected to be recognized over the weighted average remaining contractual life of 8.51 years.

The aggregate intrinsic value represents the difference between the weighted average exercise price and the closing price of the Company’s stock on December 31, 2017, or $2.53.

Employee Stock Purchase Plan: The Company established the 1999 Employee Stock Purchase Plan (“ESPP”) under the requirements of Section 423 of the Internal Revenue Code to allow eligible employees to purchase the Company’s common stock at regular intervals. Participating employees may purchase common stock through voluntary payroll deductions at the end of each participation period at a purchase price equal to 85% of the lower of the fair market value of the common stock at the beginning or the end of the participation period. The Company issued -0- shares from the ESPP in 2017 and 2016, respectively. The ESPP is no longer active.

Stock Warrants: There were no stock warrants as of December 31, 2017 and December 31, 2016.