4. Stock Based Compensation

3 Months Ended

Mar. 31, 2017

Notes

4. Stock Based Compensation

4. STOCK BASED COMPENSATION

The following table summarizes the Company’s employee stock option activity for the three months ended March 31, 2017:

	Options	Weighted average exercise price	Weighted average remaining contractual life (yrs)	Aggregate intrinsicvalue
Options outstanding, December 31, 2016	514,934	$.005	6.26	-
Options exercisable, December 31, 2016	425,934	$.003	5.78	$ 9,,350
Options issued during the period	1,503,000	.007		-
Options outstanding, March 31, 2017	2,017,934	$ .006	8.80	-
Options exercisable, March 31, 2017	426,934	$ .003	5.45	$ 5,956

During the three months ended March 31, 2017, 850,000, 650,000 and 3,000 nonqualified employee stock options were granted with exercise prices of $.01, $.003 and $.02, respectively.  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 $14,461 of which $1,202 was recognized as stock-based compensation expense for the three months ended March 31, 2017.  The stock options will vest one-third on each annual anniversary date of the grant and will expire ten years from the date of the grant. 

Total stock-based compensation expense for the three months ended March 31, 2017 was $1,651 of which $1,202 was related to options issued during the three months ended March 31, 2017 and $449 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 three months ended March 31, 2017:

	2017
Risk free interest rate	1.80% - 1.97 %
Expected lives (in years)	5
Expected volatility	173% - 174 %
Dividend yield	0 %

»]