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STOCK BASED COMPENSATION

9 Months Ended

12 Months Ended

Sep. 30, 2019

Dec. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK BASED COMPENSATION

NOTE 10 – STOCK BASED COMPENSATION

During 2007, the Board of Directors of the Company adopted the 2007 Employee Stock Plan (“2007 Plan”) that was approved by the shareholders. Under the Plan, the Company is authorized to grant options to purchase up to 10,000,000 shares of common stock to directors, officers, employees and consultants who provide services to the Company. The Plan is intended to permit stock options granted to employees under the 2007 Plan to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended (“Incentive Stock Options”). All options granted under the 2007 Plan, which are not intended to qualify as Incentive Stock Options are deemed to be non-qualified options (“Non-Statutory Stock Options”). Effective June 24, 2016, the 2007 Plan was terminated. As of September 30, 2019, options to purchase 4,450,000 shares of common stock have been issued and are outstanding.

During 2016, the Board of Directors of the Company adopted the 2016 Equity Incentive Plan (“2016 Plan”) that was approved by the shareholders at the 2016 annual meeting of shareholders on May 20, 2016. Under the 2016 Plan, the Company is authorized to grant awards of incentive and non-qualified stock options and restricted stock to purchase up to 3,000,000 shares of common stock to employees, directors and consultants. Effective May 16, 2019, the number of shares of the Company’s common stock available for issuance under the 2016 Plan was increased from 3,000,000 to 8,000,000 shares. As of September 30, 2019, options to purchase 3,178,750 shares of common stock have been issued and are outstanding and 4,821,250 shares of common stock remain available for grants under the 2016 Plan.

Both plans are administered by the Board of Directors or its compensation committee which determines the persons to whom awards will be granted, the number of awards to be granted, and the specific terms of each grant. Subject to the provisions regarding Ten Percent Shareholders, the exercise price per share of each option cannot be less than 100% of the fair market value of a share of common stock on the date of grant. Options granted under the 2016 Plan are generally exercisable for a period of 10 years from the date of grant and may vest on the grant date, another specified date or over a period of time.

The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of an award, with the following assumptions for 2019: no dividend yield in all years, expected volatility, based on the Company’s historical volatility, 60% to 80.5%, risk-free interest rate between 1.47% to 2.71% and expected option life of 5.0 to 10 years. The expected life is based on the estimated average of the life of options using the “simplified” method, as prescribed in FASB ASC 718, due to insufficient historical exercise activity during recent years.

As of September 30, 2019, there was $484,626 of unrecognized compensation expense related to non-vested market-based share awards that is expected to be recognized through September 30, 2021.

Share-based compensation was recognized as follows:


		For the Nine				For the Nine
		Months Ending				Months Ending
		September 30, 2019				September 30, 2018

2007 Employee Stock Option Plan		$	—			$	15,149
2016 Equity Incentive Plan			500,591				323,927
Warrants			57,005				62,731

Total share-based compensation		$	557,596			$	401,807

The following tables summarize all stock option and warrant activity of the Company during the nine months ended September 30, 2019:


			Non-Qualified Stock Options and Warrants Outstanding and Exercisable

			Number of				Exercise				Weighted Average
			Shares				Price				Exercise Price

Outstanding, December 31, 2018				18,964,867			$0.57 - $1.69				$	0.91

Granted				1,122,500			$0.64 - $1.05				$	0.83
Expired				(3,838,600	)		$0.95 - $1.25				$	1.13
Forfeited				(151,250	)		$0.77 - $1.50				$	0.91

Outstanding, September 30, 2019				16,097,517			$0.57 - $1.69				$	0.85

Exercisable, September 30, 2019				15,190,336			$0.57 - $1.69				$	0.85

The aggregate intrinsic value of options and warrants outstanding and exercisable as of September 30, 2019 was $117,075. The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and warrants and the closing stock price of $0.687 for the Company’s common stock on September 30, 2019. No options or warrants were exercised during the nine and three month period ending September 30, 2019. During the nine month period ending September 30, 2018, 100,000 warrants were exercised for proceeds of $61,500. During the nine month period ending September 30, 2018, 100,000 options were exercised for proceeds of $100,000. During the three month period ending September 30, 2018, 100,000 options were exercised for proceeds of $100,000.


Non-Qualified Stock Options and Warrants Outstanding
		Number Outstanding		Weighted Average		Weighted Average
Range of		Currently Exercisable		Remaining		Exercise Price of Options and
Exercise Prices		at September 30, 2019		Contractual Life		Warrants Currently Exercisable

$0.57 - $1.69		15,190,336		3.92 Years		$0.85

NOTE 10 – STOCK BASED COMPENSATION

During 2007, the Board of Directors of the Company adopted the 2007 Employee Stock Plan (“2007 Plan”) that was approved by the shareholders. Under the Plan, the Company is authorized to grant options to purchase up to 10,000,000 shares of common stock to directors, officers, employees and consultants who provide services to the Company. The Plan is intended to permit stock options granted to employees under the 2007 Plan to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended (“Incentive Stock Options”). All options granted under the 2007 Plan, which are not intended to qualify as Incentive Stock Options are deemed to be non-qualified options (“Non-Statutory Stock Options”). Effective June 24, 2016, the 2007 Plan was terminated. As of December 31, 2018, options to purchase 4,520,000 shares of common stock have been issued and are outstanding.

During 2016, the Board of Directors of the Company adopted the 2016 Equity Incentive Plan (“2016 Plan”) that was approved by the shareholders at the 2016 annual meeting of shareholders on May 20, 2016. Under the 2016 Plan, the Company is authorized to grant awards of incentive and non-qualified stock options and restricted stock to purchase up to 3,000,000 shares of common stock to employees, directors and consultants. As of December 31, 2018, options to purchase 2,235,000 shares of common stock have been issued and are outstanding and 755,000 shares of common stock remain available for grants under the 2016 Plan.

Both plans are administered by the Board of Directors or its compensation committee which determines the persons to whom awards will be granted, the number of awards to be granted, and the specific terms of each grant. Subject to the provisions regarding Ten Percent Shareholders, the exercise price per share of each option cannot be less than 100% of the fair market value of a share of common stock on the date of grant. Options granted under the 2016 Plan are generally exercisable for a period of 10 years from the date of grant and may vest on the grant date, another specified date or over a period of time.

The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of an award, with the following assumptions for 2018: no dividend yield in all years, expected volatility, based on the Company’s historical volatility, 60% to 90%, risk-free interest rate between 1.89% to 3.06% and expected option life of 5.0 to 10 years. Prior to May 2018, the expected life is based on the estimated average of the life of options using the “simplified” method, as prescribed in FASB ASC 718, due to insufficient historical exercise activity during recent years. Starting in May 2018, the expected life is based on the legal contractual life of options. The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of an award, with the following assumptions for 2017: no dividend yield in all years, expected volatility, based on the Company’s historical volatility, 39% to 87%, risk-free interest rate between 1.16% to 2.37% and expected option life of .03 to 9.08 years.

As of December 31, 2018, there was $324,497 of unrecognized compensation expense related to non-vested market-based share awards that is expected to be recognized through August 30, 2020.

Share-based compensation was recognized as follows:


		2018				2017

2007 Employee Stock Option Plan		$	15,149			$	18,322
2016 Equity Incentive Plan			372,539				776,416
Warrants			78,390				416,934

Total share-based compensation		$	466,078			$	1,211,672

The following tables summarize all stock option and warrant activity of the Company during the years ended December 31, 2018 and 2017:


		Non-Qualified Stock Options and Warrants Outstanding and Exercisable

		Number of				Exercise				Weighted Average
		Shares				Price				Exercise Price

Outstanding, December 31, 2016			18,101,367			$	0.57 - $1.69			$	0.90

Granted			1,770,000			$	0.60 - $1.50			$	0.97
Expired			(772,500	)		$	0.68 - $1.69			$	0.98
Forfeited			—				—				—
Exercised			(469,000	)		$	1.00. - $1.25			$	1.07

Outstanding, December 31, 2017			18,629,867			$	0.57 - $1.69			$	0.90

Granted			720,000			$	1.07 - $1.27			$	1.19
Expired			(100,000	)		$	0.90 - $.90			$	0.90
Forfeited			(85,000	)		$	0.92 - $1.22			$	0.96
Exercised			(200,000	)		$	0.615 - $1.00			$	0.81

Outstanding, December 31, 2018			18,964,867			$	0.57 - $1.69			$	0.91

Exercisable, December 31, 2018			18,504,240			$	0.57 - $1.69			$	0.90

The aggregate intrinsic value of options and warrants outstanding and exercisable as of December 31, 2018 was $183,350. The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and warrants and the closing stock price of $0.71 for the Company’s common stock on December 31, 2018. The total intrinsic value of options and warrants exercised during the year ended December 31, 2017 was $4,891,501. During the year ending December 31, 2018, 100,000 warrants were exercised for proceeds of $61,500. During the year ending December 31, 2018, 100,000 options were exercised for proceeds of $100,000. No options were exercised during 2017. During 2017, 335,000 warrants were exercised to purchase shares of common stock at a price of $1.00 per share for proceeds of $335,000 and 134,000 warrants were exercised to purchase shares of common stock at a price of $1.25 per share for proceeds of $167,500.


Non-Qualified Stock Options and Warrants Outstanding
		Number Outstanding		Weighted Average		Weighted Average
Range of		Currently Exercisable		Remaining		Exercise Price of Options and
Exercise Prices		at December 31, 2018		Contractual Life		Warrants Currently Exercisable

$0.57 - $1.69		18,504,240		3.53 Years		$0.90