4. STOCK BASED COMPENSATION

6 Months Ended

Jun. 30, 2018

Notes

4. STOCK BASED COMPENSATION

 

Schedule of Employee Stock Option Activity
	Options	Weighted average exercise price	Weighted average remaining contractual life (yrs)	Aggregate Intrinsic value
Options outstanding, December 31, 2017	2,110,834	$0.006	8.18
Options exercisable, December 31, 2017	626,834	$0.003	6.03	$ 22,902
Options issued during the period	2,010,000	$0.040
Options expired during the period	3,000	$0.003
Options outstanding, June 30, 2018	4,117,834	$0.023	8.63
Options exercisable, June 30, 2018	2,825,167	$0.027	8.55	$ 26,759

During the six months ended June 30, 2018, 2,010,000 nonqualified employee stock options were granted with an exercise price of $.04 per option. The options were valued using Black-Scholes option pricing model on the respective date of issuance and the fair value of the shares was determined to be $76,895 of which $67,777 was recognized as stock-based compensation expense for the six months ended June 30, 2018. Of these stock options, 1,750,000 of the stock options vested immediately upon grant (February 14, 2018) and 260,000 will vest one-fifth on each annual anniversary date of the grant. The total 2,010,000 will expire ten years from the date of the grant.  

Total stock-based compensation expense for the six months ended June 30, 2018 was $71,053 of which $67,777 was related to options issued during the six months ended June 30, 2018 and $3,276 was related to options issued in prior years. Stock-based compensation is measured at the grant date, based on the calculated fair value of the option, and is recognized as an expense on a straight-line basis over the requisite employee service period (generally the vesting period of the grant).  

The Black-Scholes option pricing model was used with the following weighted-average assumptions for options granted during the six months ended June 30, 2018:

	2018
Risk free interest rate	2.65%
Expected lives (in years)	5
Expected volatility	178%
Dividend yield	0%