4. Stock Based Compensation

9 Months Ended

Sep. 30, 2016

Notes

4. Stock Based Compensation

4. STOCK BASED COMPENSATION

The following table summarizes the Company’s employee stock option activity for the nine months ended September 30, 2016:

Schedule of Employee Stock Option Activity
	Options	Weighted average exercise price	Weighted average remaining contractual life (yrs)	Aggregate intrinsicvalue
Options outstanding, December 31, 2015	3,244,882	$.028	7.40	-
Options exercisable, December 31, 2015	2,477,215	$.026	7.26	$ 9,089
Options granted during the period	48,000	.030		-
Options forfeited during the period	(18,000)	.032		-
Options expired during the period	(1,100)	0.090		-
Options outstanding, September 30, 2016	3,273,782	$ .003	6.68	-
Options exercisable, September 30, 2016	3,139,782	$ .003	6.60	$ 69,054

During the nine months ended September 30, 2016, 48,000 nonqualified employee stock options were granted with an exercise price of $0.03 and 12,000 of those options were forfeited.  The options were valued using Black-Scholes option pricing model on the respective date of issuance and the fair value of the shares was determined to be $1,408 of which $83 was recognized as stock-based compensation expense for the nine months ended September 30, 2016. The remaining  36,000 stock options will vest one-third on each annual anniversary date of the grant and will expire ten years from the date of the grant.  During the nine months ended September 30, 2016, 6,000 and 1,100 employee stock options were forfeited and expired, respectively, that were related to options granted in prior years. During the nine months ended September 30, 2016, the exercise price of 2,968,782 employee stock options with exercise prices ranging from $.01 to $.065 was reduced to $.003.  The Company performed an analysis under ASC 718-20 “stock compensation” and recorded an incremental expense of $6,897.

Stock-based compensation expense for the three and nine months ended September 30, 2016 was $449 and $8,679, respectively. 

Stock-based compensation is measured at the grant date, based on the calculated fair value of the option, and is recognized as an expense on a straight-line basis over the requisite employee service period (generally the vesting period of the grant).    

The Black-Scholes option pricing model was used with the following weighted-average assumptions for options granted during the nine months ended September 30, 2016:

	2016
Risk free interest rate	1.25% - 1.29 %
Expected lives (in years)	5
Expected volatility	200% - 204 %
Dividend yield	0 %