NOTE F – Stock Options and Warrants

The Company currently has two non-statutory stock option plans, the Fiscal 2001 Non-statutory Stock Option Plan (the “2001 Plan”) and the 2013 Equity Compensation Plan (the “2013 Plan”). Both plans have been adopted by our Board of Directors and approved by our shareholders. Both the 2001 Plan and the 2013 Plan have options available for future issuance. Any common shares issued as a result of the exercise of stock options would be new common shares issued from our authorized issued shares.

During the three months ended September 30, 2017 and September 30, 2016, the Company issued 0 stock options.

Stock option activity for the nine months ended September 30, 2017 and September 30, 2016 is summarized as follows (the figures contained within the tables below have been rounded to the nearest thousand):

	Nine months ended September 30, 2017						Nine months ended September 30, 2016
					Aggregate						Aggregate
			Weighted		Intrinsic				Weighted		Intrinsic
			Average		Value as of				Average		Value as of
			Exercise		September 30,				Exercise		September 30,
	Shares		Price		2017		Shares		Price		2016
Options outstanding at beginning of period		2,107,000	$	0.13				1,435,000	$	0.13
Granted		40,000	$	0.13				830,000	$	0.11
Exercised		0		NA				0		NA
Cancelled/expired		0		NA				(83,000)	$	0.19
Options outstanding at end of period		2,147,000	$	0.13	$	15,000		2,182,000		0.13	$	30,000
Options exercisable at end of period		1,647,000	$	0.13				1,184,000	$	0.14

The following table summarizes weighted-average assumptions using the Black-Scholes option-pricing model used on the date of the grants issued during the nine months ended September 30, 2017 and September 30, 2016:

	Nine months ended
	2017			2016
Volatility		81	%		62% - 66	%
Expected term (years)		10 years			10 years
Risk-free interest rate		2.16	%		1.57% - 1.94	%
Dividend yield		0	%		0	%

The Company recognized $33,000 in share based payment expense in the nine months ended September 30, 2017 and $49,000 in share based payment expense in the nine months ended September 30, 2016. The Company recognized $10,000 in share based payment expense in the three months ended September 30, 2017 and $13,000 in share based payment expense in the three months ended September 30, 2016. As of September 30, 2017, there was approximately $16,000 of total unrecognized compensation cost related to non-vested stock options, which vest over time. The cost is expected to be recognized over a period ranging from 3-8 months.

Warrants

Warrant activity for the nine months ended September 30, 2017 and September 30, 2016 is summarized as follows:

	Nine months ended September 30, 2017						Nine months ended September 30, 2016
					Aggregate						Aggregate
			Weighted		Intrinsic Value				Weighted		Intrinsic Value
			Average		as of				Average		as of
			Exercise		September 30,				Exercise		September 30,
	Shares		Price		2017		Shares		Price		2016
Warrants outstanding at beginning of period		2,060,000	$	0.18				2,385,000	$	0.17
Granted		0		NA				0		NA
Exercised		0		NA				0		NA
Cancelled/expired		0		NA				(325,000)	$	0.14
Warrants outstanding at end of period		2,060,000	$	0.18	$	0		2,060,000	$	0.18	$	0
Warrants exercisable at end of period		2,060,000	$	0.18				2,060,000	$	0.18

In the nine months ended September 30, 2017 and September 30, 2016, the Company recognized $0 in debt issuance and deferred finance costs related to the issuance of the above warrants outstanding. In the three months ended September 30, 2017 and September 30, 2016, the Company recognized $0 in debt issuance and deferred finance costs related to the issuance of the above warrants. As of September 30, 2017, there was $0 of total unrecognized expense.