NOTE 8 - STOCK BASED COMPENSATION

The Company has a stock incentive plan (the “Stock Incentive Plan”) for the purpose of attracting and motivating directors, officers, employees and consultants of the Company and advancing the interests of the Company. The Stock Incentive Plan is a 15% rolling plan approved by shareholders in September 2013, whereby the Company can grant options to the extent of 15% of the current outstanding common shares. Under the plan, all forfeited and exercised options can be replaced with new offerings. As of September 30, 2016, the Company can issue stock option grants totaling up to 17,013,673 shares. Options are typically granted for a term of up to five years from the date of grant. Stock options granted generally vest over a period of eighteen months, with 25% vesting on the date of grant and 25% vesting every six months thereafter. The Company recognizes compensation expense using the straight-line method of amortization. Historically, the Company has issued new shares to satisfy exercises of stock options and the Company expects to issue new shares to satisfy any future exercises of stock options.

The following table reflects the summary of stock options outstanding at January 1, 2016 and changes for the nine months ended September 30, 2016:

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. Expected volatilities are based on historical volatility of the Company’s stock. The Company uses historical data to estimate option volatility within the Black-Scholes model. The expected term of options granted represents the period of time that options granted are expected to be outstanding, based upon past experience and future estimates and includes data from the Plan. The risk-free rate for periods within the expected term of the option is based upon the U.S. Treasury yield curve in effect at the time of grant. The Company currently does not foresee the payment of dividends on common stock in the near term.

Changes in the subjective input assumptions can materially affect the fair value estimate and, therefore, the existing models do not necessarily provide a reliable measure of the fair value of the Company’s stock options.

As of September 30, 2016, there was $338,321 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 1.5 years.

During the quarter ended September 30, 2016, 40,000 options priced between $0.48 and $0.74 with were forfeited due to termination of a contractor and an employee.

Stock Compensation Plan (Restricted Shares )

On April 12, 2016, the Company granted 269,507 shares of Company stock at a price of $0.71 to an employee of which 84,507 shares vest at grant date and the remaining 185,000 shares vest on April 12, 2017. On March 23, 2016, the Company granted 111,667 shares of Company stock at a price of $0.63 that fully vest on March 23, 2017 to its employees. On March 31, 2016, the Company granted 68,333 shares of Company stock at a price of $0.67 that fully vest on March 31, 2017 to its executive employees and directors. Through September 30, 2016, the total recognized fair value of these shares was $181,800. As of September 30, 2016, there was $125,683 of total unrecognized compensation cost related to non-vested restricted share grants.

Stock Purchase Warrants

At September 30, 2016, the outstanding broker warrants and share purchase warrants consisted of the following: