Note 7 - Stockholders Equity

6 Months Ended

Jun. 30, 2014

Notes

Note 7 - Stockholders Equity

NOTE 7 – STOCKHOLDERS EQUITY

Common Stock Issuances

On February 26, 2013, the Company issued 5,000,000 shares of common stock with a deemed value of $3,000,000 for technology assets (see Note 4).

On March 7, 2013, Spectral sold 1,650,000 common shares at approximately $0.61 per share and received a total of $1,000,000 in financing proceeds.  Contemporaneously, Spectral issued warrants to purchase 1,650,000 common shares at an exercise price of $0.80 per share.  The warrants expire March 7, 2015.  The warrants were valued using the Black-Scholes pricing model and $283,000 of the proceeds were allocated to the warrants.

On March 14, 2013, the Company issued 5,000,000 shares of common stock and 5,000,000 warrants to purchase common shares at $0.85 per share for a cost investment (see Note 5).  The warrants expire on March 13, 2015.  The shares and warrants had a deemed value of $4,850,000 and $1,548,500, respectively.

Stock Option Plan

The Company has adopted a stock option and award plan to attract, retain and motivate its directors, officers, employees, consultants and advisors. Options provide the opportunity to acquire a proprietary interest in the Company and to benefit from its growth. Vesting terms and conditions are determined by the Board of Directors at the time of the grant. The Plan provides for the issuance of up to 15,000,000 common shares for employees, consultants, directors, and advisors.

Employee stock-based compensation expense relating to options granted in 2010 and 2012 and recognized during the six months ended June 30, 2014 and 2013 totalled $359,290 and $1,069,446, respectively. At June 30, 2014, unrecognized expense of $567,254 remains to be recognized through 2015.

During the six months ended June 30, 2014, $47,345 of prepaid consulting expense, which related to stock options granted to non-employees in prior years, was charged to stock-based compensation on the accompanying statement of operations.  No unamortized prepaid consulting expense remains as of June 30, 2014.

	Stock Options	Weighted Average Exercise Price	Weighted Average Life Remaining
Outstanding, December 31, 2013	13,750,000	$       0.75	7.50
Issued	-	-	-
Exercised	-	-	-
Expired	-	-	-
Outstanding, June 30, 2014	13,750,000	$       0.75	7.25
Vested, June 30, 2014	12,950,000	$       0.73	7.04

Warrants

As of June 30, 2014 and December 31, 2013, the Company has 6,650,000 outstanding warrants.