STOCK COMPENSATION PROGRAM

6 Months Ended

Jun. 30, 2014

STOCK COMPENSATION PROGRAM [Text Block]

8.     STOCK COMPENSATION PROGRAM

Amended 2011 Stock Option Plan

The Amended 2011 Stock Option Plan, which was approved at Annual Shareholders Meeting dated February 20, 2014, authorizes the Company to issue options to purchase such number of the Company’s common shares as is equal to on aggregate, together with options issued under any prior plan, of up to 34,500,000 shares of the Company’s common stock (it is the type of stock option plan referred to as a “fixed” stock option plan).

If all or any portion of any stock option granted under the 2011 Stock Option Plan expires or terminates without having been exercised in full, the unexercised balance will be returned to the pool of stock available for grant under the 2011 Stock Option Plan.

Recognition of Stock-based Compensation Costs

Stock-based compensation costs are recognized in earnings using the fair-value based method for all awards granted. For employees fair value is estimated at the grant date and for non-employees fair value is re-measured at each reporting date. Compensation costs for unvested stock options and unvested share grants are expensed over the requisite service period on a straight-line basis.

Grants

       8.1. Stock Option Grants

The Company calculates the fair value of options granted by applying the Black-Scholes option pricing model. Expected volatility is based on the Company’s own historical share price volatility. The Company’s share price data can be traced back to April 2, 2007, and the Company believes that this set of data is sufficient to determine expected volatility as input for the Black-Scholes option pricing model.

During the six month period ended June 30, 2014 the Company granted no options. During the same period in 2013, the Company granted 3,500,000 options.

The following table shows the Company's outstanding and exercisable stock options as of June 30, 2014:

Outstanding Options 2014	Shares under option	Weighted-average exercise price	Weighted-average remaining contractual term (years)
Outstanding at December 31, 2013	12,100,000	USD0.25	7.07
Granted	-	-	-
Exercised	-	-	-
Forfeited, canceled or expired	-	-	-
Outstanding at June 30, 2014	12,100,000	USD0.25	6.56
Exercisable at June 30, 2014	11,443,750	USD0.26	6.57

The following table depicts the Company’s non-vested options as of June 30, 2014 and changes during the period:

Non-vested options	Shares under option	Weighted-average grant date fair value
Non-vested at December 31, 2013	1,468,750	USD0.05
Non-vested granted	-	-
Vested	( 812,500)	USD0.05
Non-vested, forfeited or canceled	-	-
Non-vested at June 30, 2014	656,250	USD0.06

As of June 30, 2014, the expected total of unrecognized compensation costs related to unvested stock-option grants was USD30,022. The Company expects to recognize this amount over a weighted average period of 0.59 years.

       8.2. Share Grants

The Company calculates the fair value of share grants at the grant date based on the market price at closing. For restricted share grants, the Company applies a prorated discount of 12% on the market price of the shares over the restriction period. The discount rate is an estimate of the cost of capital, based on previous long-term debt the Company has issued.

As of June 30, 2014, there were no unrecognized compensation costs related to unvested share grants.

       8.3. Summary of Stock-based Compensation Expenses

A summary of stock-based compensation expense for the respective reporting periods is presented in the following table:

Stock based compensation	Three month period ended		Six month period ended
expenses	Jun 30, 2014	Jun 30, 2013	Jun 30, 2014	Jun 30, 2013
Option grants	20,980	205,074	42,294	499,573
Share grants	-	-	-	-
Total	20,980	205,074	42,294	499,573
Recorded under “Personnel”	8,282	199,835	16,750	502,707
Recorded under “Consulting fees”	12,698	5,239	25,544	( 3,134)