Stockholders' Equity

9 Months Ended

Sep. 30, 2013

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

4. Stockholders’ Equity

Service-Based Stock Options

A summary of the outstanding service-based options issued by the Company to various employees and consultants is as follows:

Balance at December 31, 2012	9,955,000
Granted	250,000
Exercised	(500,000)
Expired	(145,000)
Balance at September 30, 2013	9,560,000

Stock based compensation expense amounted to $0 and $23,000 for the three months ended September 30, 2013 and 2012, respectively. Stock based compensation expense amounted to $52,500 and $71,500 for the nine months ended September 30, 2013 and 2012, respectively. Such amounts are included in compensation and related expenses in the accompanying statement of operations

In February 2013 the Company issued 250,000 options to a consultant (see note 7). The fair market value of these options amounted to $15,000 which was amortized over three months from February 1, 2013 to April 30, 2013. The fair value of the options was computed using the following Black Scholes model attributes: fair value of the stock at issue date - $0.16, expected life - 5 years, volatility - 50% and risk free interest rate - 2%

Options exercisable at September 30, 2013 amounted to 9,460,000. All outstanding options have a cashless exercise provision, and certain options provide for accelerated vesting provisions and modifications, as defined, if the Company is sold or acquired. The intrinsic value of options outstanding and exercisable at September 30, 2013 amounted to $467,600. The intrinsic value of options exercised during the nine month period ended September 30, 2013 amounted to $100,000.

The following is a summary of outstanding service-based options at September 30, 2013:

Exercise Price		Number of Options	Weighted Average Remaining Contractual Life
$0.10	$	1,000,000	5 years
$0.13 - $0.20		7,560,000	9 years
$0.40		1,000,000	9 years
Total	$	9,560,000

The remaining unearned compensation on unvested service-based options at September 30, 2013 amounted to $7,000 which will be amortized over the next nine months.

Performance-Based Stock Options

As of September 30, 2013 the Company had granted performance-based options to purchase 6,875,000 shares of common stock at exercise prices ranging from $0.40 to $5.00. The options expire at various dates between 2021 and 2023 and are exercisable upon the Company achieving annual sales revenue ranging from $5,000,000 and $100,000,000. The fair value of these performance-based options aggregated $298,000 and will be expensed over the implicit service period commencing once management believes the performance criteria will be met. Accordingly, at September 30, 2013, the unearned compensation for performance based options is $298,000.

Warrants

Warrants outstanding and exercisable amounted to 3,637,720 at September 30, 2013. The weighted average exercise price of warrants outstanding at September 30, 2013 is $0.28. The warrants expire between 2013 and 2015.