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5. STOCK OPTIONS

9 Months Ended

Sep. 30, 2015

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

The shareholders approved, by a majority vote, the adoption of the 1998 Stock Incentive Plan (the “Plan”). As amended on August 11, 2003, the Plan reserves 20,000,000 shares of common stock for issuance upon the exercise of options which may be granted from time-to-time to officers, directors and certain employees and consultants of the Company or its subsidiaries by the Board of Directors. The Plan permits the award of both qualified and non-qualified incentive stock options. During the nine months ended September 30, 2015, the Company issued 100,000 options to an investor who simultaneously purchased shares in the Company, 2,800,000 options to officers and a director, and 500,000 options to a director in connection with a loan made to the Company. The weighted average grant-date fair value of options granted to officers and directors during the nine months ended September 30, 2015 was $0.06.

The summary of option activity for the nine months ended September 30, 2015 is presented below:

Number of
Shares

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Life
(years)

Balance as of December 31, 2014

–

–

–

Granted

3,400,000

$

0.050

2.02

Exercised

–

–

–

Canceled

–

–

–

Expired

(100,000

)

$

0.075

–

Balance as of September 30, 2015

3,300,000

$

0.050

2.02

Outstanding and exercisable options presented by price range as of September 30, 2015 are as follows:

Options Outstanding

Options Exercisable

Weighted

Average

Weighted

Weighted

Number of

Remaining

Average

Number of

Average

Exercise

Options

Life

Exercise

Options

Exercise

Price

Outstanding

(Years)

Price

Exercisable

Price

$

0.050

3,300,000

2.02

$

0.050

3,300,000

$

0.050

The estimated fair value of the Company’s stock options, less expected forfeitures, is amortized over the options’ vesting period on a straight-line basis. All of the options granted were fully vested upon issuance. The Company recognized $162,912 and $0 of equity-based compensation expense during the nine months ended September 30, 2015 and 2014, respectively.

The intrinsic values of outstanding and vested stock options were as follows:

		September 30,				December 31,
		2015				2014
Intrinsic value - options outstanding		$	–			$	–
Intrinsic value - options exercisable		$	–			$	–
Intrinsic value - options exercised		$	–			$	–

The entire disclosure for freestanding option contracts issued by an entity that are indexed to, and potentially settled in, an entity's own stock. Includes disclosure on the strike price and the number of shares to which the contract is indexed, the settlement date or dates of the contract, and the issuer's accounting for the contract. If the terms of the contract provide settlement alternatives, those settlement alternatives are disclosed, including who controls the settlement alternatives, and the maximum number of shares that could be required to be issued, to net share settle the contract, if applicable. If a contract does not have a fixed or determinable maximum number of shares that could be required to be issued, the fact that a potentially infinite number of shares that may be required to be issued to settle the contract is disclosed. Disclosure also includes the contract's current fair value for each settlement alternative and how changes in the price of the issuer's equity instruments affect those settlement amounts.

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