STOCK OPTION PLANS

3 Months Ended

Mar. 31, 2016

NOTE 4 – STOCK OPTION PLANS

On August 25, 2005, the Board of Directors of the Company approved and adopted the 2005 Stock Incentive Plan (the Plan). The Plan became effective upon its adoption by the Board and will continue in effect for ten years, unless terminated. This plan was approved by the stockholders of the Company at their annual meeting of shareholders on November 22, 2005. Under the Plan, the exercise price for all options issued will not be less than the average quoted closing market price of the Company's trading common stock for the thirty day period immediately preceding the grant date plus a premium of ten percent. The maximum aggregate number of shares that may be awarded under the plan is 2,500,000 shares. The Company continues to utilize the Black-Scholes option-pricing model for calculating the fair value of the options granted as defined by ASC Topic 718, which is an acceptable valuation approach under ASC 718. This model requires the input of subjective assumptions, including the expected price volatility of the underlying stock.

On August 24, 2015, the Board of Directors approved the issuance of options to purchase 2,185,000 shares of the Company's common stock. Of the total issued, 1,960,000 options were issued to replace options held by directors and employees which were to expire and 225,000 options were issued to new employees. Of the options issued, 640,000 have an option price of $0.14 per share, 900,000 have an option price of $0.15 per share, 595,000 have an option price of $0.20 per share, and 50,000 have an option price of $0.25 per share. Options issued as replacement shall have immediate vesting terms. Options which are not replacements shall vest over a two year four month period in equal installments on the last day of 2015, 2016 and 2017, respectively. We relied on an exemption from the registration requirements provided by Section 4(a)(2) of the Securities Act.

Projected data related to the expected volatility and expected life of stock options is based upon historical and other information, and notably, the Company's common stock has limited trading history. Changes in these subjective assumptions can materially affect the fair value of the estimate, and therefore, the existing valuation models do not provide a precise measure of the fair value of the Company's employee stock options. Between August 25, 2005 and December 31, 2015, the Company granted options to employees to purchase an aggregate 3,096,000 shares of common stock at exercise prices ranging from $0.14 to $2.07 per share. The options vest over three years and expire 10 years from the date of grant. The Company used the following assumptions in estimating the fair value of the options granted:

Market value at the time of issuance – Range of $0.14 to 2.07
Expected term – Range of 3.7 years to 10.0 years
Risk-free interest rate – Range of 1.60% to 4.93%
Dividend yield – 0%
Expected volatility – 200% to 424%
Weighted-average fair value - $0.16 to $2.07

As of the three months ended March 31, 2016 and the years ended December 31, 2005 through 2015, the Company recognized a total of $2,398,185 of stock-based compensation expense, leaving $37,698 in unrecognized expense as of March 31, 2016. There were 2,185,000 and 2,185,000 employee stock options outstanding at March 31, 2016 and December 31, 2015, respectively.

A summary of all employee options outstanding and exercisable under the plan as of March 31, 2016, and changes during the three months then ended is set forth below:

Options	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value

Outstanding at the beginning of period	2,185,000	$	0.16		9.66	$	--
Granted	--		--		--		--
Expired	--		--		--		--
Forfeited	--		--		--		--
Outstanding at the end of Period	2,185,000	$	0.16		9.41	$	--
Exercisable at the end of Period	1,755,000	$	0.15		9.41	$	--