8. Stock Options

9 Months Ended

Sep. 30, 2017

Notes

8. Stock Options

8.     Stock Options

The Company has established a Stock Option Incentive Plan (“SIP”) to authorize the granting of stock options up to 10 percent of the total number of issued and outstanding shares of common stock to employees, directors and consultants. Upon exercise of options, shares are issued from the available authorized shares of the Company.

Option awards are generally granted with an exercise price equal to the fair market value of the Company’s stock at the date of grant. 

Effective March 21, 2017 the Company, granted 600,000 stock options to three Directors of the Company. The options are exercisable on or before March 31, 2022 at a price of $0.10 for 200,000 shares, and at a price of $0.09 for the remaining 400,000 shares.  After this grant, the Company has 5,115,000 outstanding stock options that represent 9.4% of the issued and outstanding shares of common stock. The fair value of the options was determined to be $53,557 using the Black Scholes model.  The options were fully vested upon grant and recognized as compensation expense for the quarter ended March 31, 2017.

On July 19, 2017, Paul Beckman exercised stock options representing 275,000 shares of common stock for total consideration of $28,275 which was in the form of the balance due on his note and accrued interest payable of $20,000 and $125, respectively, and $8,150 in cash.  Additionally, Larry Thackery exercised stock options for 140,000 shares of common stock for $12,400 in cash.

The fair value of each option award was estimated on the date of the grant using the assumptions noted in the following table:

Number of Options	600,000
Stock price	$0.09
Exercise price	$0.09 to $0.10
Expected volatility	235.5%
Expected dividends	-
Expected terms (in years)	5.0
Risk-free rate	1.96%

The following is a summary of the Company’s options issued under the Stock Option Incentive Plan:

	Shares	Weighted Average Exercise Price
Outstanding and exercisable at December 31, 2015	3,990,000	0.17
Expired	(2,000,000)	(0.27)
Granted	2,525,000	0.10
Outstanding and exercisable at December 31, 2016	4,515,000	$ 0.08
Granted	600,000	0.09
Exercised	(415,000)	0.10
Outstanding and exercisable at September 30, 2017	4,700,000	$0.08

The average remaining contractual term of the options outstanding and exercisable at September 30, 2017 was 3.23 years.  As of September 30, 2017, options outstanding and exercisable had a $589,098 aggregate intrinsic value based on the Company’s stock price of $0.21.