SHARE-BASED COMPENSATION

9 Months Ended

Sep. 30, 2017

NOTE 3 – SHARE-BASED COMPENSATION

On April 19, 2013, the Company granted to Mr. Christian Nielsen, accounting manager stock options to purchase 1,000,000 of the Company’s common stock for services performed for the Company, at an exercise price of $0.03 per share. The options have a five-year contractual term and are vested at the date of grant.

In accordance with the guidance provided in ASC Topic 718, Stock Compensation, the compensation costs associated with these options are recognized, based on the grant-date fair values of these options, over the requisite service period, or vesting period. Accordingly, the Company recognized a compensation expense of $56,643 for the period ended December 31, 2013.

The Company estimated the fair value of these options using the Black-Scholes-Merton option pricing model based on the following weighted-average assumptions:

Date of grant		19-Apr-13
Fair value of common stock on date of grant (A)	$	0.06
Exercise price of the options	$	0.03
Expected life of the options (years)		0.50
Dividend yield		0.00%
Expected volatility		223.57%
Risk-free interest rate		0.27%
Expected forfeiture per year (%)		0.00%
Weighted-average fair value of the options (per unit)	$	0.0566

(A)	The fair value of the Company's common stock was obtained from the closing price on the OTC Bulletin Board as of the dates of grant.

Fair value hierarchy of the above assumptions can be categorized as follows:

(1)	Level 1 inputs include:

	Fair value of common stock on date of grant- Obtained from the closing price of the Company’s common stock quoted on the OTC Bulletin Board as of the date of grant.

(2)	Level 2 inputs include:

	Expected volatility- Based on historical volatility of the closing price of the Company’s common stock quoted on the OTC Bulletin Board.

Risk-free rate- The risk-free rate of return reflects the interest rate for United States Treasury Note with similar time-to-maturity to that of the options.

(3)	Level 3 inputs include:

	Expected lives- The expected lives of options granted were derived from the output of the option valuation model and represented the period of time that options granted are expected to be outstanding.

	Expected forfeitures per year- The expected forfeitures are estimated at the dates of grant and will be revised in subsequent periods pursuant to actual forfeitures, if significantly different from the previous estimates.

The estimates of fair value from the model are theoretical values of stock options and changes in the assumptions used in the model could result in materially different fair value estimates. The actual value of the stock options will depend on the market value of the Company’s common stock when the stock options are exercised.

On June 23, 2016, the company consolidated its issued and outstanding common shares from 613,447,306 shares to 30,672,387 shares on the basis of 1 new common share for 20 old common shares (the “Reverse Stock Split”).As a result, the grant option has been adjusted to 50,000 shares.

Options issued and outstanding as of September 30, 2017 and their activities during the nine months then ended are as follows:

				Weighted-Average
	Number of		Weighted-Average	Contractual Life
	Underlying		Exercise Price Per	Remaining in
	Shares		Share	Years
Outstanding as of January 1, 2017	-	$	-
Granted – Before reverse split	1,000,000		0.03
Granted – After reverse split	50,000		0.6
Expired	-		-
Forfeited	-		-
Outstanding as of September 30, 2017	50,000		0.6	0.5
Exercisable as of September 30, 2017	50,000		0.6	0.5
Vested and expected to vest	50,000		0.6	0.5

As of September 30, 2017, the aggregate intrinsic value of options outstanding was $0.

TRANSAKT LTD. 10-Q