12. STOCK OPTIONS

12 Months Ended

Dec. 31, 2014

Notes to Financial Statements

Note 12. Stock Options

The Company adopted a stock option plan ("Plan").  The purpose of this Plan is to  provide  additional  incentives  to  key  employees, officers, directors and consultants  of  the  Company  and its subsidiaries in order to help attract and retain  the  best  available  personnel  for  positions  of  responsibility  and otherwise promote the success of the Company’s business.  It is intended that options issued under this Plan constitute non-qualified stock options. The general terms of awards under the option plan are that 100% of the options granted will vest the year following the grant.  The maximum term of options granted is 5 years.

The Company may issue stock options and stock bonuses for shares of its common stock to provide incentives to directors, key employees and other persons who contribute to the success of the Company.  The exercise price of all incentive options are issued for not less than fair market value at the date of grant.

The following table summarizes the Company’s stock option activity for the years ended December 31, 2014 and 2013:

	Number of shares			Exercise price per share		Weighted average exercise price
Balance, December 31, 2012		999,000		$	1.50 - $2.45	$	1.96
Granted		233,000		$	1.21 – 1.50	$	1.27
Cancelled or expired		(68,000	)	$	3.60	$	3.60
Balance, December 31, 2013		1,164,000		$	1.21 - $2.45	$	1.73
Granted		227,000		$	1.00 - 1.21	$	1.01
Cancelled or expired		(265,000	)	$	1.00 – 2.25	$	1.91
Balance, December 31, 2014		1,126,000		$	1.00 – 2.45	$	1.54
Exercisable, December 31, 2014		1,073,000		$	1.00 – 2.45	$	1.55

The weighted-average remaining contractual life of outstanding options is 1.9 years. The aggregate intrinsic value of options outstanding at December 31, 2014 is $23,660.

The fair value of each option grant is calculated using the following weighted average assumptions:

                                                                                                                    2014                                                  2013

Expected life – years                                                                  3.0                                                     3.0

Interest rate                                                                           0.78%                                     0.36 – 0.63%

Volatility                                                                                   58%                                            51 - 63%

Dividend yield                                                                          --%                                                     --%

Weighted average fair value of options granted$               0.36                                   $    0.36 - 0.38

During the year ended December 31, 2014, the Company granted 100,000 (2013 – 55,000) stock options to consultants and has applied ASC 718 using the Black-Scholes option-pricing model, which resulted in additional expenses of $29,026 (2013 - $16,628).  Options granted in other years resulted in additional expenses of $13,375 (2013 – $20,597).  During the year ended December 31, 2014, employees were granted 127,000 (2013 – 178,000) stock options, which resulted in additional expenses of $25,223 (2013 – $56,975).  Options granted in other years resulted in additional expenses in the amount of $23,543 for employees during the year ended December 31, 2014 (2013 - $34,955).  No stock options were exercised during the year ended December 31, 2014.

As of December 31, 2014, there was approximately $7,940 of compensation expense related to non-vested awards. This expense is expected to be recognized over a weighted average period of 1 years.