NOTE 12 - STOCK BASED COMPENSATION

Our board of directors, upon the recommendation of the compensation committee of our board of directors, approved the 2016 TechPrecision Equity Incentive Plan, or the 2016 Plan, on November 10, 2016. Our stockholders approved the 2016 Plan at the Company’s Annual Meeting of Stockholders on December 8, 2016, and it applies to awards granted after that date. The 2016 Plan provides for a share reserve of 5,000,000 shares of common stock.

On April 4, 2017, we granted stock options to members of our board of directors to collectively purchase 200,000 shares of common stock at an exercise price of $0.74 per share, the closing stock market price on the date of grant. Forty percent of the options granted vested immediately. The remaining options will vest equally at the end of each quarter during fiscal 2018, beginning with the second quarter of fiscal 2018. The fair value of the stock options expensed during the three months ended June 30, 2017 was $66,109.

The fair value of the options we grant is estimated using the Black-Scholes option-pricing model based on the closing stock prices at the grant date and the weighted average assumptions specific to the underlying options. Expected volatility assumptions are based on the historical volatility of our common stock. The average dividend yield over the historical period for which volatility was computed is zero. The risk-free interest rate was selected based upon yields of five-year U.S. Treasury issues. We used the simplified method for all grants to estimate the expected life of the option. We assume that stock options will be exercised evenly over the period from vesting until the awards expire. As such, the assumed period for each vesting tranche is computed separately and then averaged together to determine the expected term for the award. The assumptions utilized for options granted during the period were 110.1% for volatility, 1.88% for the risk free interest rate, and approximately six years for the expected life. At June 30, 2017, there were 1,797,332 shares available for grant under the 2016 Plan.

The following table summarizes information about options for the most recent annual income statements presented:

							Weighted
							Average
			Weighted		Aggregate		Remaining
	Number Of		Average		Intrinsic		Contractual Life
	Options		Exercise Price		Value		(in years)
Outstanding at 3/31/2017		3,002,668	$	0.387	$	1,246,600		5.72
Granted		200,000	$	0.740		—
Outstanding at 6/30/2017		3,202,668	$	0.409	$	992,250		6.29
Vested or expected to vest at 6/30/2017		3,202,668	$	0.409	$	992,250		6.29
Exercisable and vested at 6/30/2017		2,249,334	$	0.445	$	667,875		6.29

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the closing stock price on the last trading day of the first quarter of fiscal 2018 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on June 30, 2017. This amount changes based on the fair market value of the Company’s common stock.

The following table summarizes the status of our stock options outstanding but not vested for the year ended June 30, 2017:

			Weighted
	Number of		Average
	Options		Exercise Price
Outstanding at 3/31/2017		833,334	$	0.266
Granted		200,000	$	0.740
Vested		(80,000)	$	0.740
Outstanding at 6/30/2017		953,334	$	0.326

The total fair value of shares vested during the year was $48,079. Other information relating to stock options outstanding at June 30, 2017 is as follows:

			Weighted
			Average
			Remaining		Weighted				Weighted
	Options		Contractual		Average		Options		Average
Range of Exercise Prices:	Outstanding		Term		Exercise Price		Exercisable		Exercise Price
$0.01-$1.00		3,021,668		6.99	$	0.34		2,068,334	$	0.34
$1.01-$1.96		181,000		3.06	$	1.60		181,000	$	1.60
Totals		3,202,668						2,249,334