NOTE 19 - EMPLOYEE OPTIONS

9 Months Ended

Sep. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 19 – EMPLOYEE OPTIONS

The Company provides a stock-based compensation plan, the 2009 Long Term Incentive Plan (the “Plan”) that was adopted by the Board of Directors on September 2, 2009 and approved by stockholders on July 27, 2009. Under the Plan, the Company can grant nonqualified options to employees, officers, outside directors and consultants of the Company or incentive stock options to employees of the Company.

On July 28, 2016, the Company’s stockholders approved the following:

(1)  A one-time repricing of all of the Company’s outstanding stock options granted prior to December 1, 2015 (a total of 237,900 shares of stock) that were outstanding on July 28, 2016 to the greater of (i) the closing price of one share of the Company’s common stock on the date of the annual meeting or (ii) $2.22. The Company repriced the options to $2.22 per share during the third quarter of 2016.

(2) The following amendments to the Plan, which:

(a) Increased the number of authorized shares available for issuance under the Plan to 1.8 million shares, an increase of 1.4 million shares;

(b)  Increased the number of shares that may be granted as stock options to any one individual to 900,000, an increase of 860,000 shares; and

(c)Increased the number of automatic stock option issued to outside Board members upon their initial election or appointment to the Board to 20,000 shares and annually thereafter to 10,000 shares, provided the Board member has served on the Board at least six months.

(3) The 2016 COPsync, Inc. Employee Stock Purchase Plan, which authorizes the sale of up to 942,000 shares of the Company’s common stock.

At September 30, 2016, there were 1,800,000 shares of common stock authorized for issuance under the Plan. The outstanding options have a term of ten years and vest primarily over periods ranging from three to five years. As of September 30, 2016, options to purchase 270,833 shares of the Company’s common stock were outstanding under the Plan, of which options to purchase 181,065 shares were exercisable.

Share-based compensation expense is based upon the estimated grant date fair value of the portion of share-based payment awards that are ultimately expected to vest during the period. The grant date fair value of stock-based awards to employees and directors is calculated using the Black-Scholes option pricing model. Forfeitures of share-based payment awards are reported when actual forfeiture occurs.

For the quarter ending September 30, 2016, the Company estimated the fair value of the stock options based on the following weighted average assumptions:

Risk-free interest rate		1.58	%
Expected life	10 years
Expected volatility		119	%
Dividend yield		0.0	%

For the nine months ended September 30, 2016 and 2015, the Company recorded share-based compensation expense of $141,989 and $145,591, respectively.  Included in the 2016 share-based compensation expense is $30,228 of expense resulting from repricing 190,833 options to a lower exercise price of $2.22.

For the nine months ended September 30, 2016, the Company granted options to purchase 60,000 shares of its common stock with a weighted average exercise price of $1.68 per share to the Company’s five outside directors, who each receive options as part of their annual compensation for serving on the Company’s Board of Directors.  In August 2016 two of the outside directors resigned from the board forfeiting 20,000 options granted in the current year and 1,267 options granted in prior years.  The total value of the remaining 40,000 stock options in the aggregate, utilizing the Black Scholes valuation method, was $65,145.  The term of the stock options was ten years and vesting of the stock options was for a three-year period, with 33% vesting on the one-year anniversary of the grant date, and the remainder vesting ratably over the next eight quarters. 

The summary activity for the nine months ended September 30, 2016 under the Plan, as amended is as follows: 

	September 30, 2016
	Shares			Weighted Average Exercise Price			Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life
Outstanding at beginning of period		242,100		$	4.99		$	-
Granted		60,000		$	1.68		$	-
Exercised		–		$	0.00		$	-
Shares Repriced		–		$	(3.34	)
Forfeited/ Cancelled		(31,267	)	$	3.11		$	-
Outstanding at period end		270,833		$	2.12		$	-		6.47
Options vested and exercisable at period end		181,065		$	2.22		$	-		5.16
Weighted average grant-date fair value of options granted during the period				$	1.63

The following table summarizes significant ranges of outstanding and exercisable options as of September 30, 2016:

		Options Outstanding						Options Exercisable
Range of Exercise Prices		Options Outstanding		Weighted Average Remaining Contractual Life (in years)		Weighted Average Exercise Price		Number Outstanding		Weighted Average Exercise Price
$	1.65 – $ 2.22		270.833		6.47	$	2.12		181,065	$	2.22

A summary of the status of the Company’s non-vested option shares as of September 30, 2016 is as follows:

Non-vested Shares	Shares			Weighted Average Grant-Date Fair Value
Non-vested at January 1, 2016		66.969		$	6.34
Granted		60,000		$	1.68
Forfeited		(21,267	)	$	2.16
Vested		(15,934	)	$	12.26
Non-vested at September 30, 2016		89,768		$	1.92

As of September 30, 2016, there was approximately $380,750 of total unrecognized compensation cost related to non-vested share-based compensation arrangements.  The Company expects to recognize the unrecognized compensation cost over a weighted average period of 2.5 years.