NOTE 16. STOCK WARRANTS, OPTIONS AND GRANTS

Warrant activity. We have accounted for warrants as equity instruments in accordance with EITF 00-19 (ASC 815-40) Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock , and as such, will be classified in stockholders’ equity as they meet the definition of “…indexed to the issuer’s stock” in EITF 01-06 (ASC 815-40) The Meaning of Indexed to a Company’s Own Stock . In prior years, we estimated the fair value of the warrants using the Black-Scholes option pricing model based on assumptions at the time of issuance.

A summary of current warrant activity is as follows:

Stock options. For the three months ended March 31, 2015 and 2014, we issued 187,500 and 281,250 stock options, respectively. Stock options issued to members of our Board of Directors were 50,000 and 8,333 for the three months ended March 31, 2015 and 2014, respectively. Stock options issued to independent contractors were 37,750 and 18,750 for the three months ended March 31, 2015 and 2014, respectively.  

During the three months ended March 31, 2015, we issued 100,000 stock options to an employee, which vest over a period of three years.  The strike price was equal to the stock price at the date of the grant.

The stock options granted for the three months ended March 31, 2015 and 2014 were calculated to have a fair value of $17,418, using the Black-Scholes option pricing model with the following assumptions:

A summary of stock option activity is as follows:

Share based compensation. The cost of all stock options and stock grants issued have been classified as share based compensation for the three months ended March 31, 2015 and 2014, respectively. Total share based compensation was $18,870 and $53,688 for the three months ended March 31, 2015 and 2014, respectively.