The Company periodically issues stock options and warrants to employees and non-employees in capital raising transactions, for services and for financing costs.  Options vest and expire according to terms established at the grant date.

Options

Employee options vest according to the terms of the specific grant and expire from 2 to 10 years from date of grant. The weighted-average, remaining contractual life of employee and non-employee options outstanding at September 30, 2016 was 5.0 years. Stock option activity for the period January 1, 2016 up to September 30, 2016, was as follows:

The weighted average exercise prices, remaining contractual lives for options granted, exercisable, and expected to vest as of September 30, 2016 were as follows:

During the nine-month period ending September 30, 2016 the Company granted options to purchase 1,710,527 shares of common stock to members of the Company’s Board of Directors. The options are exercisable at $0.19 per share, vest monthly over a twelve-month period, and expire ten years from the date granted. Total fair value of these options at grant date was $273,683 using the Black-Scholes Option Pricing model with the following assumptions: life of 5.5 years; risk free interest rate of 1.73%; volatility of 119% and dividend yield of 0%. The fair value will be amortized over the vesting period.

During the nine-month period ending September 30, 2016 the Company granted options to purchase 540,000 shares of common stock to employees of the Company. The options are exercisable at $0.18 per share, vest over periods of twelve and twenty-four months, and expire ten years from the date granted. Total fair value of these options at grant date was $83,500 using the Black-Scholes Option Pricing model with the following assumptions: life of 5.5 to 6 years; risk free interest rate of 1.23%; volatility of 121% and dividend yield of 0%. The fair value will be amortized over the vesting period.

During the nine-month periods ended September 30, 2016 and 2015, the Company recognized compensation costs based on the fair value of options that vested of $265,448 and $548,619 respectively, which is included in Operating expenses in the Company’s statement of operations. During the three-month periods ended September 30, 2016 and 2015, the Company recognized compensation costs based on the fair value of options that vested of $84,293 and $162,744 respectively, which is included in Operating expenses in the Company’s statement of operations.

At September 30, 2016, the Company’s closing stock price was $0.15 per share. As all outstanding options had an exercise price greater than $0.15 per share, the aggregate intrinsic value of the options outstanding at September 30, 2016 was $0. Future unamortized compensation expense on the unvested outstanding options at September 30, 2016 is $125,462 to be recognized through May 2018.

Warrants

The following table summarizes certain information about the Company’s stock purchase warrants activity for the period starting January 1, 2016 up to September 30, 2016.

The weighted average exercise prices, remaining contractual lives for warrants granted, exercisable, and expected to vest as of September 30, 2016 were as follows:

During the nine-month period ending September 30, 2016, pursuant to terms of convertible notes issued, the Company granted warrants to purchase 7,935,225 shares of common stock with an exercise price of $0.10 per share, vesting immediately upon grant and expiring one year from the date of grant (see Note 5).

During the nine-month period ending September 30, 2016 the Company granted warrants to purchase 800,000 shares of common stock to consultants. The options are exercisable starting at $0.12 per share to $0.18 per share, vested upon issuance, and expire in one to three years from the date granted. The fair value of these warrants were computed using the Black-Scholes Option Pricing model with the following assumptions: life of 1 year through 10 years; average stock price of $0.16 per share, average risk free interest rate of 0.82%; average volatility of 110% and dividend yield of 0%. The fair value will be amortized over the vesting period.

During the nine-month period ending September 30, 2016, the Company amended the terms of a warrant issued in 2015, extending the expiration date of the warrant by twelve months. The fair value of this warrant at the date of the amendment was $32,083, computed using the Black-Scholes Option Pricing model with the following assumptions: life of 1 year; stock price of $0.17 per share, average risk free interest rate of 0.81%; average volatility of 97% and dividend yield of 0%.

During the nine-month periods ended September 30, 2016 and 2015, the Company recognized compensation costs of $92,157 and $45,113, respectively, based on the fair value of warrants that vested, which is included in Operating expenses in the Company’s statement of operations. During the three-month periods ended September 30, 2016 and 2015, the Company recognized compensation costs of $21,396 and $3,816, respectively, based on the fair value of warrants that vested, which is included in Operating expenses in the Company’s statement of operations.

At September 30, 2016, the aggregate intrinsic value of the warrants outstanding was $444,761. Future unamortized compensation expense on the unvested outstanding warrants at September 30, 2016 is $12,104 to be recognized through July 2018.