4 .	Stock-Based Compensation

The Company has

two

shareholder–approved stock-based compensation plans. The

2006

Stock Incentive Plan was adopted in

2006

(

“2006

Plan”) and had options granted under it through

April 12, 2016.

June 1, 2016,

the shareholders ratified the IAI

2016

Stock Incentive Plan (

“2016

Plan”), which had been approved by the Board of Directors on

April 4, 2016.

The Company recognizes compensation costs only for those shares expected to vest on a straight-line basis over the requisite service period of the awards. Such options generally vest over periods of

nine

months to

two

years. Fair values of option awards granted in the

three

months and

nine

months ended

September 30, 2019

and

2018,

were estimated using the Black-Scholes option pricing model under the following assumptions:

	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
Risk-free interest rate		n/a		2.75%		2.31%		2.65%	-	2.92%
Dividend yield		n/a		0%		0%			0%
Expected term (in years)		n/a		5		5			5
Expected volatility		n/a		53.4%		57.9%		49.0%	-	53.4%

2016

Stock Incentive Plan

The

2016

Plan became effective

June 1, 2016,

and expires

April 4, 2026.

The

2016

Plan provides for the granting of equity awards to key employees, including officers and directors. The maximum number of shares for which equity awards

may

be granted under the

2016

Plan is

1,000,000.

Options under the

2016

Plan expire

later than

ten

years from the date of grant or when employment ceases, whichever comes first, and vest over periods determined by the Board of Directors. The minimum exercise price of each option is the quoted market price of the Company’s stock on the date of grant. At

September 30, 2019,

there were unexpired options for

371,000

shares issued under the

2016

Plan, of which

343,500

were exercisable.

2006

Stock Incentive Plan

The

2006

Plan became effective

May 18, 2006,

and expired

April 12, 2016.

The

2006

Plan provides for the granting of equity awards to key employees, including officers and directors. Options under the

2006

Plan were generally granted at-the-money or above, expire

later than

ten

years from the date of grant or within

three

months of when employment ceases, whichever comes first, and vest over periods determined by the Board of Directors. The number of shares subject to options available for issuance under the

2006

Plan could

not

exceed

1,950,000.

There were

978,000

unexpired options remaining from the

2006

Plan at

September 30, 2019,

all of which were exercisable.

The status of the options issued under the foregoing option plans as of

September 30, 2019,

and changes during the

three

months and

nine

months ended

September 30, 2019,

were as follows:

	Options outstanding
				Weighted average		Weighted average	Aggregate
				exercise price		remaining	intrinsic
Incentive Options	Shares			per share		contractual term	value
Outstanding at January 1, 2019		1,376,500		$	0.23
Options granted		-			-
Options exercised		-			-
Options expired		(4,500	)		0.13
Options forfeited		-			-
Outstanding at March 31, 2019		1,372,000		$	0.23
Options granted		3,000			0.21
Options exercised		(10,000	)		0.10
Options expired		(11,000	)		0.08
Options forfeited		(2,500	)		0.46
Outstanding at June 30, 2019		1,351,500		$	0.23
Options granted		-			-
Options exercised		-			-
Options expired		-			-
Options forfeited		(2,500	)		0.46
Outstanding at September 30, 2019		1,349,000		$	0.23	4 years, 2 months	$	11,443
Exercisable at September 30, 2019		1,321,500		$	0.23	4 years	$	11,443

There were

options granted during the

three

months ended

September 30, 2019,

and

3,000

options granted during the

nine

months ended

September 30, 2019,

of which

none

were granted to non-employees. There were

3,000

options granted during the

three

months ended

September 30, 2018,

of which

none

were granted to non-employees, and

163,000

options granted during the

nine

months ended

September 30, 2018,

of which

5,000

were granted to non-employees. The weighted-average grant date fair values of options granted during the

nine

months ended

September 30, 2019,

was

$0.11.

There were

options and

10,000

options exercised during the

three

months and

nine

months ended

September 30, 2019,

respectively, and

options exercised during the

three

months and

nine

months ended

September 30, 2018.

As of

September 30, 2019,

there was

$1,292

of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the stock incentive plans; that cost is expected to be recognized over a weighted-average period of

five

months.

Total compensation expense related to these plans was

$585

and

$8,226

for the

three

months ended

September 30, 2019

and

2018,

respectively, of which

$426,

respectively, related to options awarded to non-employees. Total compensation expense was

$5,521

and

$23,882

for the

nine

months ended

September 30, 2019

and

2018,

respectively, of which

and

$644,

respectively, related to options awarded to non-employees. Compensation expense of

$604

was reversed in the

nine

months ending

September 30, 2019,

from options that were forfeited prior to vesting.

Nonvested option awards as of

September 30, 2019

and changes during the

three

months and

nine

months ended

September 30, 2019

were as follows:

	Nonvested
				Weighted average
				grant date
	Shares			fair value
Nonvested at January 1, 2019		148,500		$	0.20
Granted		-			-
Vested		(107,500	)		0.21
Forfeited		-			-
Nonvested at March 31, 2019		41,000		$	0.17
Granted		3,000			0.11
Vested		(12,500	)		0.17
Forfeited		(2,500	)		0.21
Nonvested at June 30, 2019		29,000		$	0.16
Granted		-			-
Vested		(1,500	)		0.12
Forfeited		-			-
Nonvested at September 30, 2019		27,500		$	0.16