Stock Incentive Plans

Under the Co-Diagnostics, Inc. 2015 Long-term Incentive Plan (the “2015 Plan”), the board of directors may issue incentive stock options, share equivalents such as restricted stock awards, stock bonus awards, performance shares and restricted stock units to employees and directors and non-qualified stock options to consultants of the company. Options generally expire ten years after being granted. Options granted vest in accordance with the vesting schedule determined by the board of directors, usually ratably over a three-year vesting schedule upon anniversary date of the grant with the first 1/3 vesting on the grant date. Should an employee terminate before the vesting period is completed, the unvested portion of each grant is forfeited. The Company has used the Black-Scholes valuation model to estimate fair value of our stock-based awards, which requires various judgmental assumptions including estimated stock price volatility, forfeiture rates, and expected life. Our computation of expected volatility is based on market-based implied volatility. The 2015 Plan reserves an aggregate of 6,000,000 shares. The number of unissued stock options authorized under the 2015 Plan at December 31, 2017 was 5,677,293.

Stock Options

There were 61,335 and 163,641 options granted in the years ended December 31, 2017 and 2016, respectively. The Black-Scholes valuation model requires various judgmental assumptions including the estimated volatility, risk-free interest rate and expected option term. In determining the expected volatility our computation is based the stock prices of 3 comparable companies and is based on a combination of historical and market-based implied volatility. The risk-free interest rate was based on the yield curve of a zero-coupon U.S. Treasury bond on the date the warrant was issued with a maturity equal to the expected term of the option. The fair values for the options granted were estimated at the date of grant using the Black Scholes option-pricing model with the following weighted average assumptions:

 Included in stock based compensation for the year ended December 31, 2017, the Company recognized expense of $122,259 recorded in our general and administrative department (i) $97,474 for 61,335 options granted to three members of our board of directors and (ii) $24,785 for options vesting which had been granted prior to January 1, 2017.

Included in stock based compensation for the year ended December 31, 2016, the Company recognized $69,565 of stock based compensation expense recorded in our general and administrative department of which (i) $51,432 for options granted to 10 employees and one consultant of the company to purchase an aggregate of 163,641 shares of our common stock and (ii) $18,133 for the vesting of options which had been granted prior to January 1, 2016.

The following table summarizes option activity during the years ended December 31, 2017 and December 31, 2016, respectively.

Warrants

The Company estimates the fair value of issued warrants on the date of issuance as determined using a Black-Scholes pricing model. The Company amortizes the fair value of issued warrants using a vesting schedule based on the terms and conditions of each associated underlying contract, as earned. The Black-Scholes valuation model requires various judgmental assumptions including the estimated volatility, risk-free interest rate and expected warrant term. In determining the expected volatility our computation is based the stock prices of 3 comparable companies and is based on a combination of historical and market-based implied volatility. The risk-free interest rate was based on the yield curve of a zero-coupon U.S. Treasury bond on the date the warrant was issued with a maturity equal to the expected term of the warrant.

There were 595,133 and 102,039 warrants issued in the years December 31, 2017 and 2016, respectively. The fair values for the warrants issued were estimated at the date of grant using the Black Scholes option-pricing model with the following weighted average assumptions:

The weighted average fair value of warrants issued during the years ended December 31, 2017 and 2016 was $1.74 and $0.11 per share, respectively.

Included in stock based compensation for the year ended December 31, 2017, the Company recognized expense of $256,199 recorded in our general and administrative department for 297,727 warrants issued to 2 companies for services rendered.

The following table summarizes warrant activity during the years ended December 31, 2017 and 2016, respectively.

The following table summarizes information about stock options and warrants outstanding at December 31, 2017.

Common Stock

In the year ended December 31, 2017, the Company issued 399,209 share of our common stock valued at $1,655,500 to 4 companies for consulting services, as stock based compensation. For the year ended December 31, 2017, the Company recognized expense of $813,229 in our general and administrative department for to-date services rendered.

Total unrecognized stock-based compensation was $842,271 at December 31, 2017 which the Company expects to recognize in 2018.