Stock Plans and Stock Based Compensation

6 Months Ended

Jun. 30, 2014

Stock Plans and Stock Based Compensation [Abstract]

Stock Plans and Stock Based Compensation

Note 7. Stock Plans and Stock Based Compensation

In 1998, the Board adopted the 1998 Stock Option Plan (“1998 Plan”), which was subsequently approved by the shareholders. The 1998 Plan, as amended, authorizes the granting of awards, the exercise of which would allow up to an aggregate of 6,375,000 shares of Andrea’s Common Stock to be acquired by the holders of those awards. The awards can take the form of stock options, stock appreciation rights, restricted stock, deferred stock, stock reload options or other stock-based awards. Awards may be granted to key employees, officers, directors and consultants. No further awards will be granted under the 1998 Plan.

In October 2006, the Board adopted the Andrea Electronics Corporation 2006 Equity Compensation Plan (“2006 Plan”), which was subsequently approved by the shareholders. The 2006 Plan, as amended, authorizes the granting of awards, the exercise of which would allow up to an aggregate of 18,000,000 shares of Andrea’s Common Stock to be acquired by the holders of those awards. The awards can take the form of stock options, stock appreciation rights, restricted stock or other stock-based awards. Awards may be granted to key employees, officers, directors and consultants. At June 30, 2014, there were 4,461,936 shares available for further issuance under the 2006 Plan.

The stock option awards granted under these plans have been granted with an exercise price equal to the market price of the Company’s stock at the date of grant; with vesting periods of up to four years and 10-year contractual terms.

The fair values of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model that uses the weighted-average assumptions. Expected volatilities are based on implied volatilities from historical volatility of the Company’s stock. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

There were no options granted during the three and six months ended June 30, 2014 and 2013.

Option activity during 2014 is summarized as follows:

	Options Outstanding							Options Exercisable
	Options  Outstanding		Weighted  Average  Exercise Price		Weighted  Average  Fair Value		Weighted  Average  Remaining  Contractual Life	Options  Exercisable	Weighted  Average  Exercise Price		Weighted  Average  Fair Value		Weighted  Average  Remaining  Contractual Life
At January 1, 2014	17,225,321		$	0.08	$	0.08	4.03 years	17,108,654	$	0.08	$	0.08	3.99 years
Cancelled/Expired	(625,000	)	$	0.12	$	0.12
At June 30, 2014	16,600,321		$	0.08	$	0.08	3.59 years	16,483,654	$	0.08	$	0.08	3.55 years

Based on the June 30, 2014 fair market value of the Company’s common stock of $0.08, the aggregate intrinsic value for the 16,600,321 options outstanding and 16,483,654 shares exercisable is $265,250.

Total compensation expense recognized related to stock option awards was $2,583 and $5,937 for the three months ended June 30, 2014 and 2013, respectively. In the accompanying condensed consolidated statements of operations for the three months ended June 30, 2014, $2,583 of expense is included in general, administrative and selling expenses. In the accompanying condensed consolidated statements of operations for the three months ending June 30, 2013, $5,094 of expense is included in general, administrative and selling expenses, $675 is included in research and development expenses and $168 is included in cost of revenues. Total compensation expense recognized related to all stock option awards was $6,165 and $11,810 for the six months ending June 30, 2014 and 2013, respectively. In the accompanying condensed consolidated statements of operations for the six months ending June 30, 2014, $6,165 of expense is included in general, administrative and selling expenses. In the accompanying condensed consolidated statements of operations for the six months ending June 30, 2013, $10,188 of expense is included in general, administrative and selling expenses, $1,350 is included in research and development expenses and $272 is included in cost of revenues.

As of June 30, 2014, there was $5,586 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the 2006 Plans. This unrecognized compensation cost is expected to be recognized during 2014 and 2015.