Note 10 - Stock-Based Compensation

12 Months Ended

Dec. 31, 2013

Note 10 - Stock-Based Compensation

Note 10 - Stock-Based Compensation

Note 10 – Stock-Based Compensation

In 2009, the Company approved the 2009 Employee, Director and Consultant Stock Option Plan (The Plan) and authorized an option pool of 5,500,000 shares. Stock options typically vest over a 3 year period and have a life of 10 years from the date granted. As of December 31, 2013, there were 16,233 shares available for awards under this plan.

In 2012, the Company approved the 2012 Employee, Director and Consultant Stock Option Plan (The Plan) and authorized an option pool of 7,500,000 shares. Stock options typically vest over a 3 year period and have a life of 10 years from the date granted.  As of December 31, 2013, there were 5,046,141 shares available for awards under this plan.

During the year ended December 31, 2013, the Company issued options to acquire 4,970,000 shares of common stock at exercise price(s) of $0.35-$0.70 per share to employees, directors, and consultants. During the year ended December 31, 2012, the Company issued options to acquire 5,830,000 shares of common stock at exercise price of $0.35 per share to employees, directors, and consultants.

The grant-date fair value of options is estimated using the Black Scholes option pricing model.  The per share weighted average fair value of stock options granted during 2013 was $0.36 and was determined using the following assumptions: expected price volatility ranging between 51% to 53%, risk-free interest rate ranging from .76% to 1.68%, zero expected dividend yield, and six years expected life of options. The per share weighted average fair value of stock options granted during 2012 was $.13 and was determined using the following assumptions:  expected price volatility ranging between 51% to 52%, risk-free interest rates ranging from  0.61% to 0.86%, zero expected dividend yield, and six years expected life of options.  The expected term of options granted is based on the simplified method in accordance with Securities and Exchange Commission Staff Accounting Bulletin 107, and represents the period of time that options granted are expected to be outstanding.  The Company makes assumptions with respect to expected stock price volatility based on the average historical volatility of peers with similar attributes. In addition, the Company determines the risk free rate by selecting the U.S. Treasury with maturities similar to the expected terms of grants, quoted on an investment basis in effect at the time of grant for that business day.

As of December 31, 2013, there was approximately $532,395 of total unrecognized stock compensation expense, related to unvested stock options under the Plan.  This expense is expected to be recognized over the remaining weighted average vesting periods of the outstanding options of 1.8 years.

A summary of options issued, exercised and cancelled for the years ended December 31, 2013 and 2012 are as follows (shares have been retroactively adjusted for the 1 for 3 reverse stock split in 2011):

	Shares		Weighted-Average ExercisePrice		Weighted-Average RemainingContractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2011		1,783,333	$	0.32		6.08		—
Granted		5,830,000	$	0.35		9.60		—
Cancelled		(228,715)		0.32		—		—
Outstanding at December 31, 2012		7,384,618	$	0.34		8.30		—
Granted		4,970,000	$	0.48		9.87		—
Exercised		(110,092)	$	0.35		—		—
Cancelled		(3,928,568)	$	0.35		—		—
Outstanding at December 31, 2013		8,315,958	$	0.42		9.09		—