NOTE 11 – STOCK OPTIONS AND RESTRICTED STOCK UNITS

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 (restricted stock units), or stock appreciation rights to be granted by the Board in its discretion.

In recognition of and compensation for services rendered by employees for the year ended December 31, 2016, the Company issued 710,000 common stock options under the Founders Plan on February 25, 2016. Of these 710,000 options, all are vested as of December 31, 2016, and 40,000 options previously granted in 2015 were cancelled in 2016 due to termination of employment.

In recognition of and compensation for services rendered by the Company’s Board Chairman, the Company issued 400,000 common stock options under the 2014 Plan on February 25, 2016, which contained vesting provisions that provided for immediate vesting of 200,000, and 200,000 on August 25, 2016.

In recognition of and compensation for services rendered by employees and members of the Company’s Board of Directors, the Company issued 3,300,000 common stock options, 450,000 restricted stock units and 450,000 shares of common stock under the 2016 Plan as follows:

On February 25, 2016, the Company issued 1,800,000 common stock options to the Company’s Board Chairman, which contains provisions for vesting upon the achievement of specific milestones. As of December 31, 2016, by action of the Board of Directors, all 1,800,000 were deemed vested.

The 450,000 restricted stock units were issued on February 25, 2016, and provide for vesting in full on February 21, 2017; however, as of September 30, 2016, all these restricted stock units had been terminated as the relevant employees were no longer with the Company.

On March 21, 2016, the Company issued 400,000 common stock options to a member of the Board of Directors, which provided for immediate vesting of 200,000 shares and 200,000 shares vested on September 21, 2016.

In June 2016, the Company issued 150,000 common stock options under the 2016 Plan to one new Board of Advisors Member. The options vest one-half in six months and the balance in 12 months, with a 10-year term and exercisable at a price of $0.30 per share (re-priced to $0.21 per share as discussed below).

In August 2016, the Company issued 150,000 common stock options under the 2016 Plan to one new Board of Advisors Member. The options vest one-half in six months and the balance in 12 months, with a 10-year term and exercisable at a price of $0.21 per share.

In December 2016, the Company issued 800,000 common stock options under the 2016 Plan to two members of the Board of Directors. The options vest one half in six months and the balance in 12 months, with a 5-year term and exercisable at a price of $0.21 per share.

Options awarded under the Option Plans and the 2016 Plan for year ended December 31, 2016 were valued at $530,000 (pursuant to the Black Scholes valuation model, and as shown in the table detailing the calculation of fair value below), with a weighted average exercise price of $0.21 per share and with a weighted average contractual life of 5.5 years.

In October 2016, per resolution of the Board of Directors, all outstanding stock options were reset to a $0.21 per share exercise price. The Company recorded a corresponding expense of $157,225.

For the year ended December 31, 2016, the charge to the consolidated statements of operations for the amortization of stock option grants and restricted stock units awarded under the Option Plans and the 2016 Plan was $665,680. The remaining unamortized stock option expense for all outstanding stock options at December 31, 2016 was $142,339. On May 27, 2016, the majority of the employees of the Subsidiary were terminated in an effort to reduce expenses, and were allowed to retain their options, which were immediately vested. The expense related to the outstanding options previously granted to these terminated employees was recognized in full in this period as they were no longer subject to a service requirement with respect to vesting of the award.

A summary of the common stock options issued under the Option Plans and the 2016 Plan for the period from December 31, 2015 through December 31, 2016 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.