STOCK-BASED COMPENSATION PLAN AND WARRANTS

3 Months Ended

Mar. 31, 2014

STOCK-BASED COMPENSATION PLAN AND WARRANTS [Abstract]

STOCK-BASED COMPENSATION PLAN AND WARRANTS

NOTE 14 – STOCK-BASED COMPENSATION PLAN AND WARRANTS

The Company’s Incentive Compensation Plan (the “Plan”), which was last amended and restated with shareholder approval in December 2012, provides for the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units and cash incentive awards.

A summary of the status of stock options under the Plan as of March 31, 2014 and December 31, 2013 is as follows:

	3/31/2014					12/31/2013
	Number of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Outstanding at beginning of year		9,583,762		$	1.16		7,728,877		$	1.01
Granted		1,844,300		$	0.56		2,176,535		$	1.67
Exercised		-		$	-		(293,650	)	$	0.98
Expired and Cancelled		(80,000	)	$	1.02		(28,000	)	$	2.18
		11,348,062					9,583,762
Outstanding, end of period		11,348,062		$	1.06		9,583,762		$	1.16
Exercisable at end of period		9,964,837		$	1.14		9,536,262		$	1.17

During the three months ended March 31, 2014 the Company granted to employees 1,844,300 options at an exercise price of $0.56 per share valued at $916,225.  Stock-based compensation expense for the three months ended March 31, 2014 was $251,159.  As of March 31, 2014, the unrecognized compensation cost related to all non-vested share-based compensation arrangements granted under the Plan was $687,168 and will be recognized in each of the remaining fiscal 2014 quarters.

During the three months ended March 31, 2013, the Company granted 1,986,535 options valued at $2,079,484.  Stock-based compensation expense for the three months ended March 31, 2013 was $676,932.

During the three months ended March 31, 2014, there were no stock options exercised either for cash or on a cashless basis.

During the three months ended March 31, 2013 a former employee exercised 10,000 stock options and the Company received proceeds of $10,100.  Also during this period the Company issued 79,825 shares of Common Stock on the cashless exercise of 160,000 stock options.

The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option valuation model.  This model uses the assumptions listed in the table below for stock options granted in 2014.  Expected volatilities are based on the historical volatility of the Company’s stock.  The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

	3/31/2014
Weighted average fair value per option granted	$	0.4968
Risk-free interest rate		1.75	%
Expected dividend yield		0.00	%
Expected lives		2.688
Expected volatility		98.91	%

Stock options outstanding at March 31, 2014 are as follows:

				Weighted
				Average		Weighted
				Remaining		Average
		Options		Contractual		Exercise		Options
Range of Exercise Prices		Outstanding		Life		Price		Exercisable
$	0.01-$1.50		8,874,527		2.4	$	0.77		7,491,302
$	1.51-$3.00		2,348,535		3.5	$	1.67		2,348,535
$	3.01-$5.00		125,000		3.6	$	3.11		125,000
			11,348,062		2.7	$	1.07		9,964,837

Warrants

As of March 31, 2014, the Company has warrants outstanding to purchase 16,590,351, shares of the Company’s common stock, at prices ranging from $0.01 to $1.50 per share.  These warrants expire at various dates through November 2018.   The summary of the status of the warrants issued by the Company as of March 31, 2014 and December 31, 2013 are as follows:

	3/31/2014					12/31/2013
	Number of Warrants			Weighted Average Exercise Price		Number of Warrants			Weighted Average Exercise Price
Outstanding at beginning of year		16,688,265		$	1.44		23,392,811		$	1.46
Granted		-		$	-		4,010,295		$	1.18
Exercised		-		$	-		(2,287,730	)	$	1.43
Cashless Exercises		-		$	-		(8,082,535	)	$	1.43
Expired and Cancelled		(97,914	)	$	0.01		(344,576	)	$	0.88
		16,590,351					16,688,265
Outstanding, end of period		16,590,351		$	1.44		16,688,265		$	1.44
Exercisable at end of period		16,590,351		$	1.44		16,688,265		$	1.44

There were no warrants granted during the three months ended March 31, 2014.  Also during this period there were no warrants exercised either for cash or on a cashless basis.

For the three months ended March 31, 2013, there were no warrants granted to investors.

During the three months ended March 31, 2013, several investors participated in a warrant exercise program that resulted in the exercise of 1,756,088 warrants into 1,756,088 shares of the Company’s common stock.  The warrant program, which was open to all holders of $1.50 warrants, allowed those warrant holders to exercise their warrants for a $1.25 strike price during February 2013. The conversion of these warrants raised $2,195,110 of gross proceeds for the Company.

Also during the first quarter of 2013, other investors exercised 82,753 warrants and received 82,753 shares of common stock with the Company receiving proceeds of $30,511.  Other investors exercised 223,988 of warrants on a cashless basis and the Company issued 117,999 shares of common stock during this period.