STOCK TRANSACTIONS

12 Months Ended

Dec. 31, 2016

STOCK TRANSACTIONS

STOCK TRANSACTIONS

NOTE 7 - STOCK TRANSACTIONS

Series C Preferred Stock

On July 9, 2009, the Company authorized and issued 67 shares of Series C Preferred Stock in exchange for $700,000.  The 67 shares of Series C Stock were convertible into 4,531,962 common shares.  The par value of the Series C Preferred shares is $1.00.

On May 5, 2015, the 67 Series C Preferred shares were converted into 4,531,962 common shares.

Warrants

During September and October of 2007, the Company issued 2,121,569 shares of common stock for cash at $0.255 per share, 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 remain outstanding at December 31, 2016. The warrants are ten year warrants and have an 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 have an exercise price of $0.435 and 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 have an exercise price of $0.435 and vested on August 5, 2016.

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 year ended December 31, 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

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 exercise price of $0.435 with 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 year ended December 31, 2016:

Risk free interest rate – 1.13 – 1.59%

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 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 years ended December 31, 2016 and 2015, the Company recognized stock based compensation expense of $67,057 and $95,469, respectively, related to these stock options. Such amounts are included in compensation expense in the accompanying consolidated statements of income. A further compensation expense expected to be $48,825 will be recognized for these options in 2017.

The following table sets forth the Company's stock options outstanding as of December 31, 2016, and December 31, 2015 and activity for the years then ended:

	Shares			Weighted Average Exercise Price		Weighted Average Fair Value		Weighted Average Remaining Contractual Term (Years)		Intrinsic Value
Outstanding, January 1, 2015		5,168,894		$	0.435	$	0.294		2.36	$	-
Granted		420,000			0.435		0.182		-		-
Exercised		-			-		-		-		-
Forfeited/expired		(316,667	)		0.435		0.099		-		-
Outstanding, December 31, 2015		5,272,227		$	0.435	$	0.303		1.73	$	-
Granted		210,000			0.435		0.390		4.82		-
Exercised		-			-		-		-		-
Forfeited/expired		(300,001	)		0.435		0.105		-		-
Outstanding, December 31, 2016		5,182,226		$	0.435	$	0.318		.97	$	-
Vested/exercisable at December, 31, 2015		5,062,227		$	0.435	$	0.315		1.60	$	-
Vested/exercisable at December, 31, 2016		4,972,226		$	0.435	$	0.315		.80	$	-

The following table summarizes the information with respect to options granted, outstanding and exercisable under the 2005 plan:

Exercise Price		Options Outstanding		Remaining Contractual Life in Years		Average Exercise Price		Number of Options Currently Exercisable
$	.435		3,665,556		0.33	$	.435		3,665,556
$	.435		166,668		1.33	$	.435		166,668
$	.435		46,668		2.33	$	.435		46,668
$	.435		66,667		0.83	$	.435		66,667
$	.435		10,000		1.08	$	.435		10,000
$	.435		56,667		2.42	$	.435		56,667
$	.435		20,000		3.42	$	.435		20,000
$	.435		10,000		4.50	$	.435		10,000
$	.435		300,000		0.58	$	.435		300,000
$	.435		200,000		2.00	$	.435		200,000
$	.435		10,000		7.00	$	.435		10,000
$	.435		200,000		3.00	$	.435		200,000
$	.435		10,000		8.00	$	.435		10,000
$	.435		200,000		3.58	$	.435		200,000
$	.435		10,000		8.58	$	.435		10,000
$	.435		200,000		4.58	$	.435		-
$	.435		10,000		9.58	$	.435		-

Adoption of Stock Repurchase Plan

On August 23, 2016, the Company's Board of Directors authorized the Company to implement a stock repurchase plan for up to $750,000 shares of the Company's outstanding common stock. The stock purchases can be made in the open market, structured repurchase programs, or in privately negotiated transactions. Any repurchase will have the status of treasury shares. The Company has no obligation to repurchase shares under the authorization, and the timing, actual number and value of the shares which are repurchased will be at the discretion of management and will depend on a number of factors including the price of the Company's common stock, market conditions, corporate developments and the Company's financial condition. The repurchase plan maybe discontinued at any time at the Company's discretion and the continuance of the program will be reviewed by the Board of Directors prior to the end of December 31, 2016.

On December 21, 2016, the Company's Board of Directors approved an extension of the Company's stock repurchase plan through December 31, 2017, subject to an earlier termination at the discretion of the Company's Board of Directors.