Note 3 - Summary of Accounting Policies	12 Months Ended
Dec. 31, 2018
Notes to Financial Statements
Basis of Presentation and Significant Accounting Policies [Text Block]	NOTE 3: SUMMARY OF ACCOUNTING POLICIES Basis of Presentation: The accompanying consolidated financial statements have been prepared pursuant to the rules of the Securities and Exchange Commission (“SEC”) and in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying consolidated financial statements include the financial statements of Atossa Genetics Inc. and its wholly-owned subsidiaries. All significant intercompany account balances and transactions have been eliminated in consolidation. On April 20, 2018, the Company completed a 1 -for- 12 reverse stock split of the shares of the Company’s common stock (the “Reverse Stock Split”). As a result of the Reverse Stock Split, every 12 shares of issued and outstanding common stock were combined into one issued and outstanding share of common stock, and the par value per share was changed to $0.18 per share. The number of authorized shares of common stock was not reduced as a result of the Reverse Stock Split. The Company’s common stock began trading on a reverse stock split-adjusted basis on April 20, 2018. All share and per share data included in this report has been retroactively restated to reflect the Reverse Stock Split. Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Recently Issued Accounting Pronouncements: In February 2016, Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016 - 02, Lease Accounting Topic 842. The new standard is effective for reporting periods beginning after December 15, 2018 and early adoption is permitted. The standard will require lessees to report most leases as assets or liabilities on the balance sheet, while lessor accounting will remain substantially unchanged. The standard permits two approaches, one requiring retrospective application of the new guidance with restatement of prior years, and one requiring prospective application of the new guidance. We plan to adopt the new lease standard effective January 1, 2019 and apply it prospectively. We do not expect the new lease standard to have a material effect on our financial position, results of operations or cash flows. Upon adoption of ASU 2016 - 02, we will be required to recognize an operating lease liability and right-of-use asset of approximately $100,000, based on the lease composition disclosed in footnote 13. In November 2016, the FASB issued ASU No. 2016 - 18, Statement of Cash Flows , amending the presentation of restricted cash within the statement of cash flows. The new guidance requires that restricted cash be included within cash and cash equivalents on the statement of cash flows. The Company adopted the provisions of ASU No. 2016 - 18 as of January 1, 2018 on a retrospective basis. For years ended December 31, 2018 and 2017, we included $110,000 and $55,000, respectively, of restricted cash within cash, cash equivalents, and restricted cash on the statement of cash flows. The restricted cash represents a required deposit for the Company credit card and is restricted until the Company no longer has the credit card or the limit changes on the credit card. In July 2017, the FASB issued ASU 2017 - 11, Accounting for Certain Financial Instruments with Down Round Features and Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception . Part I of this ASU addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of future equity offerings. Current accounting guidance requires financial instruments with down round features to be accounted for at fair value. Part II of the Update applies only to nonpublic companies and is therefore not applicable to the Company. The amendments in Part I of the Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity-classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. This update is effective for public entities for fiscal years beginning after December 15, 2018. Early adoption is permitted. The Company early adopted the provisions of ASU No. 2017 - 11 as of January 1, 2018. As the Company does not have any financial instruments with down round features, this ASU did not have a material impact on the financial statements upon adoption. In June 2018, the FASB issued ASU 2018 - 07, Compensation-Stock Compensation Improvements to Nonemployee Share Based Payment Accounting. This ASU simplifies several aspects of the accounting for non-employee share-based payment transactions resulting from expanding the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide financing to the issuer or was granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers . This update is effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted. The Company early adopted the provisions of ASU No. 2018 - 17 as of April 1, 2018 and it did not have a material impact on the financial statements upon adoption. In June 2018, the FASB issued ASU 2018 - 08, Not -for-Profit Entities (Topic 958 ): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. This ASU affects not -for-profit entities and business entities that receive or make contributions of cash. The ASU clarifies and improves the scope and accounting guidance to assist entities in evaluating if those transactions should be accounted for as contributions under the scope of Topic 958 or as an exchange transaction subject to other guidance. This update is effective for public entities for fiscal years beginning after December 15, 2018. The Company is currently evaluating the impact that adoption will have on its financial statements. Research and Development All research and development costs are expensed as incurred. Income Taxes The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered or settled. Realization of deferred tax assets is dependent upon future taxable income. A valuation allowance is recognized if it is more likely than not that some portion or all of a deferred tax asset will not be realized based on the weight of available evidence, including expected future earnings. The Company recognizes an uncertain tax position in its financial statements when it concludes that a tax position is more likely than not to be sustained upon examination based solely on its technical merits. Only after a tax position passes the first step of recognition will measurement be required. Under the measurement step, the tax benefit is measured as the largest amount of benefit that is more likely than not to be realized upon effective settlement. This is determined on a cumulative probability basis. The full impact of any change in recognition or measurement is reflected in the period in which such change occurs. The Company elects to accrue any interest or penalties related to income taxes as part of its income tax expense. Cash and Cash Equivalents Cash and cash equivalents include cash and all highly liquid instruments with original maturities of three months or less. Furniture and Equipment Furniture and equipment are stated at cost less accumulated depreciation. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When furniture and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation is computed using the straight-line method over the estimated useful lives ranging from three to five years. Furniture and equipment amounted to $216,000 and $171,000 at December 31, 2018 and 2017, respectively. Accumulated depreciation was $162,000 and $160,000 at December 31, 2018 and 2017, respectively. Depreciation expense for the years ended December 31, 2018 and 2017 was $14,386 and $25,956, respectively. The Company periodically evaluates the carrying value of long-lived assets to be held and used and, if necessary, records impairment losses when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-loved assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal. For the years ended December 31, 2018 and 2017, no impairment of furniture and equipment was recorded. Fair Value Measurements The Company records financial assets and liabilities measured on a recurring and non-recurring basis as well as all non-financial assets and liabilities subject to fair value measurement at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. These fair value principles prioritize valuation inputs across three broad levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company's assumptions used to measure assets and liabilities at fair value. An asset or liability's classification within the various levels is determined based on the lowest level input that is significant to the fair value measurement. Intangible Assets Intangible assets consist of intellectual property and software acquired. Intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the assets might not be recoverable. Impairment losses must be recorded when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the assets. Estimating future cash flows related to an intangible asset involves significant estimates and assumptions. If our assumptions are not correct, there could be an impairment loss or, in the case of a change in the estimated useful life of the asset, a change in amortization expense. During the year ended December 31, 2017, we determined certain intangible assets acquired from Acueity Healthcare, Inc. ("Acueity") were impaired and recorded an asset impairment charge of $461,715 for the year ended December 31, 2017, to adjust the carrying value of these intangible assets to zero as of December 31, 2017. No impairment charges were recorded during the year ended December 31, 2018. We determined the fair values of the Acueity intangibles using an income approach (Level 3 of the fair value hierarchy). For purposes of the income approach, fair value was determined based on the present value of estimated future cash flows that a market participant could expect to generate from the development of products using the patented technology acquired in the Acueity transaction, discounted at an appropriate risk-adjusted rate reflecting the weighted average cost of capital for a potential market participant. The discount rate used in valuation for these intangible assets was 48.50%. The estimated future cash flows, including an estimate of long-term future growth rates, reflect our own assumptions of what market participants would utilize to price the assets pursuant to ASC 820, Fair Value Measurements . Amortization of intangible assets is computed using the straight-line method over the estimated useful lives ranging from three to ten years. Intangible assets amounted to $192,000 and $234,000 for at December 31, 2018 and 2017, respectively. Accumulated amortization was $93,000 and $158,000 at December 31, 2018 and 2017, respectively. Amortization expense for the years ended December 31, 2018 and 2017 was $29,811 and $103,038, respectively. Financial Instruments with Characteristics of Both Liabilities and Equity During the year ended December 31, 2017, the Company issued certain financial instruments, consisting of warrants to purchase common stock, which have characteristics of both liability and equity. Financial instruments such as warrants that are classified as liabilities are fair valued upon issuance and are re-measured at fair value at subsequent reporting periods with the resulting change in fair value recorded in “change in fair value of common stock warrants” in the consolidated statement of operations. The fair value of warrants is estimated using valuation models that require the input of subjective assumptions including stock price volatility, expected life, and the probability of future equity issuances and their impact to the price protection feature. There were no outstanding warrants accounted for as liabilities as of December 31, 2018 or 2017. Share-Based Payments The Company follows the provisions of ASC Topic 718, Compensation - Stock Compensation (“ASC 718” ), which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, non-employee directors, and consultants, including employee stock options. Stock compensation expense based on the grant date fair value estimated in accordance with the provisions of ASC 718 is recognized as an expense over the requisite service period and the Company made a policy election to recognize forfeitures when they occur. The fair value of each option grant is estimated using the Black-Scholes option-pricing model, which requires assumptions regarding the expected volatility of the stock options, the expected life of the options, an expectation regarding future dividends on the Company’s common stock, and estimation of an appropriate risk-free interest rate. The Company’s expected common stock price volatility assumption is based upon the historical volatility of our stock price. The expected life assumption for stock options grants was based upon the simplified method provided for under ASC 718 - 10, which averages the contractual term of the options of ten years with the vesting term, typically one to four years. The dividend yield assumption of zero is based upon the fact that the Company has never paid cash dividends and presently has no intention of paying cash dividends in the future. The risk-free interest rate used for each grant was based upon prevailing short-term interest rates over the expected life of the options.

NOTE

SUMMARY OF ACCOUNTING POLICIES

Basis of Presentation:

The accompanying consolidated financial statements have been prepared pursuant to the rules of the Securities and Exchange Commission (“SEC”) and in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying consolidated financial statements include the financial statements of Atossa Genetics Inc. and its wholly-owned subsidiaries. All significant intercompany account balances and transactions have been eliminated in consolidation.

April 20, 2018,

the Company completed a

-for-

reverse stock split of the shares of the Company’s common stock (the “Reverse Stock Split”). As a result of the Reverse Stock Split, every

shares of issued and outstanding common stock were combined into

one

issued and outstanding share of common stock, and the par value per share was changed to

$0.18

per share. The number of authorized shares of common stock was

not

reduced as a result of the Reverse Stock Split. The Company’s common stock began trading on a reverse stock split-adjusted basis on

April 20, 2018.

All share and per share data included in this report has been retroactively restated to reflect the Reverse Stock Split.

Use of Estimates:

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Recently Issued Accounting Pronouncements:

February 2016,

Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

No.

2016

02,

Lease Accounting Topic

842.

The new standard is effective for reporting periods beginning after

December 15, 2018

and early adoption is permitted. The standard will require lessees to report most leases as assets or liabilities on the balance sheet, while lessor accounting will remain substantially unchanged. The standard permits

two

approaches,

one

requiring retrospective application of the new guidance with restatement of prior years, and

one

requiring prospective application of the new guidance. We plan to adopt the new lease standard effective

January 1, 2019

and apply it prospectively. We do

not

expect the new lease standard to have a material effect on our financial position, results of operations or cash flows. Upon adoption of ASU

2016

02,

we will be required to recognize an operating lease liability and right-of-use asset of approximately

$100,000,

based on the lease composition disclosed in

footnote

13.

November 2016,

the FASB issued ASU

No.

2016

18,

Statement of Cash Flows

, amending the presentation of restricted cash within the statement of cash flows. The new guidance requires that restricted cash be included within cash and cash equivalents on the statement of cash flows. The Company adopted the provisions of ASU

No.

2016

as of

January 1, 2018

on a retrospective basis. For years ended

December 31, 2018

and

2017,

we included

$110,000

and

$55,000,

respectively, of restricted cash within cash, cash equivalents, and restricted cash on the statement of cash flows. The restricted cash represents a required deposit for the Company credit card and is restricted until the Company

longer has the credit card or the limit changes on the credit card.

July 2017,

the FASB issued ASU

2017

11,

Accounting for Certain Financial Instruments with Down Round Features and Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception

. Part I of this ASU addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of future equity offerings. Current accounting guidance requires financial instruments with down round features to be accounted for at fair value. Part II of the Update applies only to nonpublic companies and is therefore

not

applicable to the Company. The amendments in Part I of the Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature

longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. As a result, a freestanding equity-linked financial instrument (or embedded conversion option)

longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity-classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic

260

to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. This update is effective for public entities for fiscal years beginning after

December 15, 2018.

Early adoption is permitted. The Company early adopted the provisions of ASU

No.

2017

as of

January 1, 2018.

As the Company does

not

have any financial instruments with down round features, this ASU did

not

have a material impact on the financial statements upon adoption.

June 2018,

the FASB issued ASU

2018

07,

Compensation-Stock Compensation Improvements to Nonemployee Share Based Payment Accounting.

This ASU simplifies several aspects of the accounting for non-employee share-based payment transactions resulting from expanding the scope of Topic

718

to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic

718

to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost. The amendments also clarify that Topic

718

does

not

apply to share-based payments used to effectively provide financing to the issuer or was granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic

606,

Revenue from Contracts with Customers

. This update is effective for public entities for fiscal years beginning after

December 15, 2018,

including interim periods within that fiscal year. Early adoption is permitted. The Company early adopted the provisions of ASU

No.

2018

as of

April 1, 2018

and it did

not

have a material impact on the financial statements upon adoption.

June 2018,

the FASB issued ASU

2018

08,

Not

-for-Profit Entities (Topic

958

): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made.

This ASU affects

not

-for-profit entities and business entities that receive or make contributions of cash. The ASU clarifies and improves the scope and accounting guidance to assist entities in evaluating if those transactions should be accounted for as contributions under the scope of Topic

958

or as an exchange transaction subject to other guidance. This update is effective for public entities for fiscal years beginning after

December 15, 2018.

The Company is currently evaluating the impact that adoption will have on its financial statements.

Research and Development

All research and development costs are expensed as incurred.

Income Taxes

The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered or settled. Realization of deferred tax assets is dependent upon future taxable income. A valuation allowance is recognized if it is more likely than

not

that some portion or all of a deferred tax asset will

not

be realized based on the weight of available evidence, including expected future earnings. The Company recognizes an uncertain tax position in its financial statements when it concludes that a tax position is more likely than

not

to be sustained upon examination based solely on its technical merits. Only after a tax position passes the

first

step of recognition will measurement be required. Under the measurement step, the tax benefit is measured as the largest amount of benefit that is more likely than

not

to be realized upon effective settlement. This is determined on a cumulative probability basis. The full impact of any change in recognition or measurement is reflected in the period in which such change occurs. The Company elects to accrue any interest or penalties related to income taxes as part of its income tax expense.

Cash and Cash Equivalents

Cash and cash equivalents include cash and all highly liquid instruments with original maturities of

three

months or less.

Furniture and Equipment

Furniture and equipment are stated at cost less accumulated depreciation. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When furniture and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations.

Depreciation is computed using the straight-line method over the estimated useful lives ranging from

three

five

years.

Furniture and equipment amounted to

$216,000

and

$171,000

December 31, 2018

and

2017,

respectively. Accumulated depreciation was

$162,000

and

$160,000

December 31, 2018

and

2017,

respectively. Depreciation expense for the years ended

December 31, 2018

and

2017

was

$14,386

and

$25,956,

respectively.

The Company periodically evaluates the carrying value of long-lived assets to be held and used and, if necessary, records impairment losses when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-loved assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal. For the years ended

December 31, 2018

and

2017,

impairment of furniture and equipment was recorded.

Fair Value Measurements

The Company records financial assets and liabilities measured on a recurring and non-recurring basis as well as all non-financial assets and liabilities subject to fair value measurement at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. These fair value principles prioritize valuation inputs across

three

broad levels. Level

inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level

inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level

inputs are unobservable inputs based on the Company's assumptions used to measure assets and liabilities at fair value. An asset or liability's classification within the various levels is determined based on the lowest level input that is significant to the fair value measurement.

Intangible Assets

Intangible assets consist of intellectual property and software acquired. Intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the assets might

not

be recoverable. Impairment losses must be recorded when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the assets. Estimating future cash flows related to an intangible asset involves significant estimates and assumptions. If our assumptions are

not

correct, there could be an impairment loss or, in the case of a change in the estimated useful life of the asset, a change in amortization expense.

During the year ended

December 31, 2017,

we determined certain intangible assets acquired from Acueity Healthcare, Inc. ("Acueity") were impaired and recorded an asset impairment charge of

$461,715

for the year ended

December 31, 2017,

to adjust the carrying value of these intangible assets to

zero

as of

December 31, 2017.

impairment charges were recorded during the year ended

December 31, 2018.

We determined the fair values of the Acueity intangibles using an income approach (Level

of the fair value hierarchy). For purposes of the income approach, fair value was determined based on the present value of estimated future cash flows that a market participant could expect to generate from the development of products using the patented technology acquired in the Acueity transaction, discounted at an appropriate risk-adjusted rate reflecting the weighted average cost of capital for a potential market participant. The discount rate used in valuation for these intangible assets was

48.50%.

The estimated future cash flows, including an estimate of long-term future growth rates, reflect our own assumptions of what market participants would utilize to price the assets pursuant to ASC

820,

Fair Value Measurements

Amortization of intangible assets is computed using the straight-line method over the estimated useful lives ranging from

three

ten

years.

Intangible assets amounted to

$192,000

and

$234,000

for at

December 31, 2018

and

2017,

respectively. Accumulated amortization was

$93,000

and

$158,000

December 31, 2018

and

2017,

respectively. Amortization expense for the years ended

December 31, 2018

and

2017

was

$29,811

and

$103,038,

respectively.

Financial Instruments with Characteristics of Both Liabilities and Equity

During the year ended

December 31, 2017,

the Company issued certain financial instruments, consisting of warrants to purchase common stock, which have characteristics of both liability and equity. Financial instruments such as warrants that are classified as liabilities are fair valued upon issuance and are re-measured at fair value at subsequent reporting periods with the resulting change in fair value recorded in “change in fair value of common stock warrants” in the consolidated statement of operations. The fair value of warrants is estimated using valuation models that require the input of subjective assumptions including stock price volatility, expected life, and the probability of future equity issuances and their impact to the price protection feature. There were

outstanding warrants accounted for as liabilities as of

December 31, 2018

2017.

Share-Based Payments

The Company follows the provisions of ASC Topic

718,

Compensation - Stock Compensation

(“ASC

718”

), which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, non-employee directors, and consultants, including employee stock options. Stock compensation expense based on the grant date fair value estimated in accordance with the provisions of ASC

718

is recognized as an expense over the requisite service period and the Company made a policy election to recognize forfeitures when they occur.

The fair value of each option grant is estimated using the Black-Scholes option-pricing model, which requires assumptions regarding the expected volatility of the stock options, the expected life of the options, an expectation regarding future dividends on the Company’s common stock, and estimation of an appropriate risk-free interest rate. The Company’s expected common stock price volatility assumption is based upon the historical volatility of our stock price. The expected life assumption for stock options grants was based upon the simplified method provided for under ASC

718

10,

which averages the contractual term of the options of

ten

years with the vesting term, typically

one

four

years. The dividend yield assumption of

zero

is based upon the fact that the Company has never paid cash dividends and presently has

intention of paying cash dividends in the future. The risk-free interest rate used for each grant was based upon prevailing short-term interest rates over the expected life of the options.