Note

10.

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, Stock Units, Performance Awards, or other Awards to employees, non-employee directors, and consultants. The Board of Directors has authorized

5,000,000

shares (adjusted for the

-for-

reverse split effective on

July

23,

2015)

of our 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 our 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

2016,

in an amount equal to

of the issued and outstanding shares of Stock on the last day of the immediately preceding year, or such lesser amount if so determined by the Board or the Administrator. During

2016,

the Company granted

133,334

restricted stock units to directors. During

2015,

the Company granted

117,666

restricted stock units from the Plan.

66,666

were to directors and

51,000

were to employees either as a new hire bonus, or performance bonus.

Treasury Stock

: During

2016,

the Company purchased

246,717

shares with a value of

$431,705

to cover the employee’s and director’s share to tax liabilities related to stock grants maturing on

December

27,

2016.

Stock Awards:

The Company has granted restricted stock awards to its employees at different periods from

2005

through

2015.

The majority of the shares granted to those employees vest

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 entered into

two

Director’s agreements in

2016

where each 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 vested on

January

2017.

The remaining shares will vest

two

in installments:

22,222

shares vesting on

January

2018,

and

22,222

shares vesting on

January

2019.

For

one

director, the shares vesting on

January

2018

and shares vesting on

January

2019

were forfeited as of

January

2017.

The Company also had an employment agreement that granted

266,667

shares in

2015

of our common stock set to vest on

March

2025

which were forfeited on

December

31,

2016.

The Company entered into

one

Director’s agreement where the director received

33,333

restricted stock units in

2015

of our common stock at the start of his directorship term, pursuant and subject to the terms of the Company’s

2015

Equity Incentive Plan.

11,112

shares vested on

April

24,

2015

and

11,112

shares vested on

January

2016.

11,109

shares vesting on

January

2017

were forfeited during

2016.

During

2016

a portion of the restricted stock awards were granted, but not issued and are not listed as outstanding in the financial statements for

2016.

Stock-based compensation expense related to stock options and restricted stock awards was

$1,314,778

for

2016

and

$1,275,130

for

2015.

The following table presents a summary of the Company’s restricted stock awards outstanding at

December

31,

2016.

All share numbers have been adjusted for the

-for-

reverse split effective on

July

23,

2015.

Stock Awards	Shares		Weighted Average Exercise Price		Weighted Average Contractual Remaining Life		Aggregate Intrinsic Value

Outstanding, December 31, 2015		4,324,102	$	1.98
Granted		-		-
Vested		696,159		-
Forfeited		266,667		-

Outstanding, December 31, 2016		3,361,276	$	1.85		4.17	$	-

Expected to Vest after December 31, 2016		3,361,276	$	1.85		4.17	$	-

As of

December

31,

2016,

there was

$4,082,025

of unrecognized compensation costs related to the unvested share-based compensation arrangements granted. The cost is expected to be recognized over the weighted average remaining contractual life of

4.17

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,

2016,

$1.85.

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 -

- shares from the ESPP in

2016

and

2015,

respectively. The ESPP is no longer active.

Stock Warrants:

There were no stock warrants as of

December

31,

2016

and

December

31,

2015.