Stock Options

3 Months Ended

Mar. 31, 2014

Notes to Financial Statements

Stock Options

As of March 31, 2014, the Company had two equity compensation plans, the 1996 Stock Option Plan (the “1996 Plan”) and the 2006 equity compensation plan (the “2006 Plan”). The 1996 Plan has expired for the purposes of issuing new grants. However, the 1996 Plan will continue to govern awards previously granted under that plan. The 2006 Plan has been approved by the Company’s shareholders. Equity compensation grants are designed to reward employees and executives for their long term contributions to the Company and to provide incentives for them to remain with the Company. The number and frequency of equity compensation grants are based on competitive practices, operating results of the company, and government regulations.

 The following table summarizes information about stock options outstanding and exercisable at March 31, 2014:

	Number of Share Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term in Years		Aggregate Intrinsic Value(1)
Outstanding at December 31, 2013		5,210,000	$	0.12		2.72	$	—
Granted		—	$	—		—	$	—
Exercised		—	$	—		—	$	—
Forfeited or Cancelled		69,000	$	1.26		—	$	—
Outstanding at March 31, 2014		5,141,000	$	0.10		2.42	$	—
Exercisable at March 31, 2014		632,000	$	0.67		2.65	$	—
Vested and expected to vest (2)		5,141,000	$	0.10		2.42	$	—

(1)	Aggregate intrinsic value represents the value of the closing price per share of our common stock on the last trading day of the fiscal period in excess of the exercise price multiplied by the number of options outstanding or exercisable, except for the “Exercised” line, which uses the closing price on the date exercised.
(2)	Number of shares includes options vested and those expected to vest net of estimated forfeitures.

 The exercise prices of the options outstanding at March 31, 2014 ranged from $0.07 to $4.35. The Company’s policy is to issue shares from its authorized shares upon the exercise of stock options.

Unvested share activity for the three months ended March 31, 2014 is summarized below:

	Unvested Number of Options			Weighted Average Grant Date Fair Value
Unvested balance at December 31, 2013		4,535,000		$	0.02
Granted		—		$	—
Vested		(25,000	)	$	0.11
Forfeited		—		$	—
Unvested balance at March 31, 2014		4,510,000		$	0.02

 The fair values of all stock options granted are estimated on the date of grant using the Black-Scholes option-pricing model. During the three months ended March 31, 2014 and 2013 no options were granted.

The estimated fair value of grants of stock options to nonemployees of the Company is charged to expense in the financial statements. These options vest in the same manner as the employee options granted under each of the option plans as described above.