NOTE 11 – STOCK OPTIONS

On July 31, 2014, the Board of Directors of Q2P approved the Founders Stock Option Plan (“Founders Plan") and the 2014 Employee Stock Option Plan (the “2014 Plan”), collectively the “Option Plans”. The Option Plans were developed to provide a means whereby directors and selected employees, officers, consultants, and advisors of the Company may be granted incentive or non-qualified stock options to purchase restricted common stock of the Company. On February 25, 2016, to accommodate the appointment of new Board members and additional incentive stock options and stock grants to key employees of the Company, the Board approved the 2016 Omnibus Equity Incentive Plan (“2016 Plan”), which allowed for an additional 4 million shares of common stock, stock options, stock rights, or stock appreciation rights to be granted by the Board in its discretion.

No options were issued under the Founders Plan for the year ended December 31, 2015.

In recognition of and compensation for services rendered by employees and advisors for the year ended December 31, 2015, Q2P issued 1,137,000 common stock options under the 2014 Plan, as follows:  On March 20, 2015, the Board of Directors authorized the issuance of options to purchase 600,000 shares of restricted common stock to key employees, which contained vesting provisions that provide for vesting of the award semi-annually over a period of 3 years from the vest start date; on June 2, 2015, the Board of Directors authorized the issuance of options to purchase 250,000 shares of restricted common stock to its independent board member, which contained provisions for the vesting of the award over three months from the date of grant; and on June 30, 2015, the Board of Directors authorized the issuance of options to purchase 287,000 shares of restricted common stock to key employees and its CFO.  During the period ending December 31, 2015, 15,000 options were cancelled due to termination of employment.

The options awarded prior to the merger under the 2014 Plan in 2015 were valued at $261,223 (before cancellation) (pursuant to the Black Scholes valuation model, and as further detailed in the table detailing the calculation of fair value below), based on an exercise price of $0.27 per share and with a maturity life of 10 years.

Pursuant to the provisions of the Option Plans, upon the event of a change in control, all options outstanding under the Option Plans became immediately vested and exercisable, and, on November 11, 2015 the Board of Directors authorized the accelerated vesting of all outstanding options issued under the Founders Plan and the 2014 Plan.

As a result of the Merger, the Company assumed the Founders Plan and the 2014 Plan, and all issued option grants became subject to the Exchange Ratio.  Such option grants were assumed by the Company with an exercise price equal to the fair market value of the Company’s common stock on the date of the Merger, or $0.30.

Subsequent to the Merger and in addition to the 2015 Option grants described above, on November 15, 2015, the Board of Directors authorized the issuance of options to purchase 60,000 shares of common stock to our CFO, which contained vesting provisions that provide for vesting of the award at December 31, 2015; on November 18, 2015, the Board of Directors authorized the issuance of options to purchase 490,000 shares of common stock to key employees, options to purchase 60,000 shares of common stock to a member of the board (who abstained from the vote of the issuance of such options), and options to purchase 80,000 shares of common stock to key advisors, which contained vesting provisions that provide for vesting of the award semi-annually over a period of 3 years from the vest start date. The options awarded under the 2014 Plan subsequent to the Merger were valued at $122,820 (including options granted to the Company’s CFO) (pursuant to the Black Scholes valuation model, and as further detailed in the table detailing the calculation of fair value below), based on an exercise price of $0.30 per share and with a maturity life of 10 years. 

For the year ended December 31, 2015, the charge to the consolidated statement of operations for the amortization of stock option grants awarded under these two Option Plans was $517,039.

A summary of the common stock options issued under the Option Plans for the period from December 31, 2013 through December 31, 2015 follows:

The vested and exercisable options at period end follows:

The fair value of new stock options granted using the Black-Scholes option pricing model was calculated using the following assumptions:

Expected volatility is based on historical volatility of two securities which the Company believes best match the characteristics of the Company for purposes of measuring volatility in the absence of a market trading history of the Company’s common stock. Short Term U.S. Treasury rates were utilized as the risk free interest rate. The expected term of the options was calculated using the alternative simplified method codified as ASC 718 “Accounting for Stock Based Compensation,” which defined the expected life as the average of the contractual term of the options and the weighted average vesting period for all issuances.