STOCK TRANSACTIONS AND SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2016

STOCK TRANSACTIONS AND SUBSEQUENT EVENTS

STOCK TRANSACTIONS AND SUBSEQUENT EVENTS

NOTE 6 - STOCK TRANSACTIONS AND SUBSEQUENT EVENTS

Warrants

During September and October 2007, the Company issued 31,823,529 shares of common stock for cash at $0.017 per share, or $541,000 total as part of a Private Placement under Rule 506 of Regulation D. Along with the stock, each investor also received a warrant to purchase 30% of the shares purchased in the Private Placement.  A total of 636,474 warrants were issued. The warrants are ten year warrants and have a exercise price of $0.255 per share.

Options

In 2005, the Company authorized the 2005 Equity Plan that made available 666,667 of common stock for issuance through awards of options, restricted stock, stock bonuses, stock appreciation rights and restricted stock units.

On January 2, 2015, the Company granted 200,000 stock options to two directors of the Company and 10,000 stock options to the Company Secretary.  The options vested on August 5, 2015.

On August 6, 2015, the Company granted 200,000 stock options to two directors of the Company and 10,000 stock options to the Company Secretary.  The options will vest on August 5, 2016.

On July 20, 2016, the Company granted 200,000 stock options to two directors of the Company and 10,000 stock options to the Company Secretary. These options have an effective date of August 6, 2016 and will vest on August 5, 2017.

In applying the Binomial Lattice (Suboptimal) option pricing model to stock option granted, the Company used the following weighted average assumptions: The following assumptions were used in the fair value calculations of options granted during the six month periods ended June 30, 2016 and 2015:

Risk free interest rate – 1.61 – 2.23%

Expected term – 5 to 10 years

Expected volatility of stock – 500%

Expected dividend yield – 0%

Suboptimal Exercise Behavior Multiple – 2.0

Number of Steps – 150

The risk-free interest rate is based on rates of treasury securities with the same expected term as the options. The Company uses the expected term of employee and director stock-based options. The Company is utilizing an expected volatility figure based on a review of the Company's historical volatility, over a period of time, equivalent to the expected life of the instrument being valued.

The expected dividend yield is based upon the fact that the Company has not historically paid dividends, and does not expect to pay dividends in the near future.

 For the period ended June 30, 2016, the Company recognized compensation expense of $28,500 related to these stock options. A further compensation expense of $5,481 will be recognized for these options in 2016

A summary of the stock option activity during the six months ended June 30, 2016 is presented below:

					Weighted
			Weighted		Average
			Average		Remaining		Aggregate
			Exercise		Contractual		Intrinsic
	Shares		Price		Term (Years)		Value
Outstanding, December 31, 2015		5,272,227	$	0.435		1.73	$	-
Granted		-		0.435		-		-
Exercised		-		-		-		-
Forfeited/expired		-		0.435		-		-
Outstanding, June 30, 2016		5,272,227	$	0.435		1.23	$	-
Vested/exercisable at December, 31, 2015		5,062,227	$	0.435		1.60	$	-
Vested/exercisable at June, 30, 2016		5,062,227	$	0.435		1.10	$	-