11.

EMPLOYEE STOCK OPTIONS

On March 28, 2018, upon approval of the Company’s board of directors the Company granted outside its 2015 Equity Plan, 100,000 options each to a newly-appointed director, Robert Guerra. These options vest 50% one year after the date of grant and the remaining 50% two years after the date of grant provided the director is still actively involved with the Company. The options are exercisable at an exercise price of $1.00 per share and expire on March 28, 2022. During the three months ended March 31, 2018, $190 compensation expense was recognized on these 100,000 options with a remaining balance of $31,132 to be recognized over the vesting period.

On December 13, 2017, upon approval of the Company’s board of directors the Company issued outside its 2015 Equity Plan, 100,000 options each to two newly-appointed directors, or a total of 200,000 options. These options vest 50% after one year and the remaining 50% after two years provided the director is still actively involved with the Company. The options are exercisable at an exercise price of $1.00 per share and expire on December 13, 2021. During the three months ended March 31, 2018 and twelve months ended December 31, 2017, $18,213 and $3,593, respectively, compensation expense was recognized on these 200,000 options with a remaining balance of $77,983 to be recognized over the vesting period.

On November 9, 2017, upon approval of the Company’s board of directors, the Company issued outside its 2015 Equity Plan, 2,000,000 options to purchase the Company’s common stock to officers, directors, and for services provided. Jay Nussbaum was issued 900,000 options, Felicia Hess was issued 300,000 options, Dan Erdberg was issued 200,000 options, Kendall Carpenter was issued 170,000 options, Directors David Aguilar, Mike Haas and General Wayne Jackson were issued 10,000, 10,000 and 10,000 options, respectively. Reginald Brown, Jr. was issued 400,000 options. These stock options immediately vested, are exercisable at an exercise price of $1.35 per share and expire on November 9, 2021. During the twelve months ended December 31, 2017, $1,846,075 compensation expense was recognized on these 2,000,000 options

During 2016, the Company granted 10,000 options to an employee with two-year vesting and an exercise price of $3.00 and an expiration date of December 6, 2019. The Company recognized $1,104 in compensation for the three months ended March 31, 2018 with a remaining balance of $2,708 to be recognized over the vesting period.

On June 1, 2015, the Company issued an option award to an employee for 37,500 shares vesting over three years with an exercise price of $10.80 and expiration date of May 4, 2019. During the three months ended March 31, 2018, $8,620 compensation expense was recognized on these 37,500 options and with a remaining balance of $5,749 to be recognized over the vesting period.

On January 9, 2017, the Company issued an option to purchase 100,000 shares of common stock with an exercise price of $2.90 per share to a director. The option vests 50,000 after one year from grant date and another 50,000 two years from grant date with an expiration date of four years from grant date provided that the Director is still providing service to the Company. During the three months ended March 31, 2018, $11,278 compensation expense was recognized on these 100,000 options with a remaining balance of $33,836 to be recognized over the vesting period.

The Company used the Black-Scholes option pricing model to estimate the fair value on the date of grant of the 100,000 options granted during the three months ended March 31, 2018.

The following table summarizes the assumptions used to estimate the fair value of the 100,000 stock options granted during the three months ended March 31, 2018 on the date of grant.

	2018

Expected dividend yield		0	%
Expected volatility		83-86	%
Risk-free interest rate		2.49	%
Expected life of options		2.50-3.00 years

Under the Black-Scholes option pricing model, the fair value of the 100,000 options granted during the three months ended March 31, 2018 is estimated at $31,322 on the date of grant. During the three months ended March 31, 2018, $190 compensation expense was recognized on these 100,000 options.

The following table represents stock option activity as of and for the three months ended March 31, 2018:

	Number of Options			Weighted Average Exercise Price per Share		Weighted Average Contractual Life in Years		Aggregate Intrinsic Value
Outstanding – December 31, 2017		7,945,000		$	1.38		3.50
Exercisable – December 31, 2017		7,627,500		$	1.35		3.50	$	0
Granted		100,000		$	1.00
Cancelled or Expired		(0	)	$	.00
Outstanding – March 31, 2018		8,045,000		$	1.37		3.27	$	0
Exercisable – March 31, 2018		7,677,500		$	1.36		3.25	$	0