Our Board of Directors adopted, and our stockholders approved, the 2013 Plan, which provided for the issuance of incentive awards of up to 7,000,000 shares of the Company’s common stock (until it was amended as provided below) to officers, key employees, consultants and directors.

On January 23, 2014, the Company issued, under the 2013 Plan, 300,000 options to three employees, each with a term of ten years, exercisable at $1.76 per common share. 125,000 of these options vest 25% per year, with accelerated vesting of 25% upon a termination without cause or for good reason, with the remaining 175,000 vesting 20% per year. On March 21, 2014, the Company issued, under the 2013 Plan, 30,000 options to one employee with a term of ten years, exercisable at $2.30 per common share and vests 20% per year commencing on March 31, 2015.

On July 16, 2014, the Company issued incentive stock options to purchase 50,000 shares of common stock under the 2013 Plan to one employee with a term of ten years, exercisable at $1.24 per common share which vest 20% per year commencing July 16, 2015.

On July 23, 2014, the Company’s Board, and on June 9, 2015, the stockholders, approved increasing the total shares available under the 2013 Plan by 3,000,000 to 10,000,000.

Also, on July 23, 2014, the Board granted non-qualified stock options to three directors, each in the amount of 100,000 shares of common stock; 50,000 of which have an exercise price equal to $1.11 per share, which vested on the date of the grant hereof; and 50,000 of which have an exercise price equal to two times the value of the exercise price of the first 50,000 options, or $2.22 per share, which vest daily over four (4) years (assuming continued service on behalf of the Company), up to 25% per year, until the grant is fully vested on July 23, 2018.

On September 12, 2014, the Board granted the Company’s Chief Executive Officer and Chairman non-qualified options to purchase 250,000 and 50,000 shares of the Company’s common stock, respectively, which have an exercise price of $0.60 per share, are fully vested upon grant and have a term of ten years. Also, the Board granted 300,000 non-qualified stock options to a newly appointed director with a term of ten years, exercisable at $0.60 per share and vesting daily over five years commencing September 12, 2014.

On March 19, 2015, the Company issued stock options to purchase 20,000 shares of the Company’s common stock to one employee with a term of ten years, exercisable at $1.17 per share and vesting 20% per year commencing March 19, 2016. In addition, the Company issued stock options to purchase 50,000 shares of the Company’s common stock to one consultant with a term of ten years, exercisable at $1.17 per share and vesting over four years beginning September 15, 2014. As of September 30, 2015, the consultant’s options terminated with no vested options exercised based upon the consultant not renewing their consulting agreement with the Company.

 

On November 17, 2015, the Company issued stock options to purchase 100,000 shares of the Company’s common stock to our President and Chief Executive Officer with a term of ten years, exercisable at $0.60 per share, vested immediately upon grant. In addition, on November 19, 2015, the Company issued stock options to purchase a total of 1,075,000 shares of the Company’s common stock with a term of ten years, exercisable at $0.80 per share vesting 25% on the issuance date and 25% each anniversary for three years. Of the total, 600,000 options to purchase to our President and Chief Executive Officer, 200,000 to the Company’s Chairman of the Board, 50,000 each to two directors, 100,000 to our Chief Financial Officer and 75,000 to two employees.

 

The following is a summary of stock option activity under the stock option plans for the years ended December 31, 2015 and 2014:

The Company used the Black-Scholes valuation model to calculate the fair value of stock options. Stock-based compensation expense is recognized over the vesting period using the straight-line method.

The fair value of stock options issued for the year ended December 31, 2015 was estimated at the grant date using the following weighted average assumptions: Dividend yield 0%; Volatility 90.11%; Risk-free interest rate 2.23%; weighted average grant date fair value of $0.46 per share. There is no current allowance for forfeitures.

The total stock option-based compensation recorded as operating expense was $722,934 and $1,203,663 for the years ended December 31, 2015 and 2014, respectively. All of the stock option-based compensation expense was classified as stock based compensation expense. On September 28, 2015, the Company’s Board of Directors amended the option agreements granted to all its officers and directors to clarify that the options were to be deemed non-qualified stock options.