Annual report pursuant to Section 13 and 15(d)

9. Stock Options and Warrants

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9. Stock Options and Warrants
12 Months Ended
Dec. 31, 2013
Stock Options And Warrants  
9. Stock Options and Warrants

The Company granted stock options to certain employees under two plans. The 1996 Stock Option Plan was adopted in 1996 (“1996 Plan”) and had options granted under it through May 29, 2006. In 2006, the Board of Directors approved and the shareholders ratified the 2006 Stock Incentive Plan (“2006 Plan”).

 

The Company recognizes compensation costs only for those shares expected to vest on a straight-line basis over the requisite service period of the awards. Generally such options vest over periods of six months to two years.  The fair values of option awards granted in 2013 and 2012 were estimated using the Black-Sholes option pricing model under the following assumptions:

 

    2013     2012  
Risk free interest rate     0.70% - 2.65 %     0.62% - 2.31 %
Dividend yield     0 %     0 %
Expected term   5-10 years     5-10 years  
Expected volatility     51.5 – 62.8 %     62.8 – 67.9 %

 

2006 Stock Incentive Plan

 

The 2006 Plan became effective May 18, 2006, and expires May 17, 2016. The 2006 Plan provides for the granting of equity awards to key employees, including officers and directors. The maximum number of shares for which equity awards may be granted under the 2006 Plan is 1,950,000. Options under the 2006 Plan expire no later than ten years from the date of grant or when employment ceases, whichever comes first, and vest over periods determined by the Board of Directors. The exercise price of each option equals the quoted market price of the Company’s stock on the date of grant.

 

1996 Stock Option Plan

 

The 1996 Plan provided for the granting of options to purchase shares of our common stock to key employees, including officers and directors. The maximum number of shares for which options could be granted under the 1996 Plan was 3,075,000. Options expire no later than ten years from the date of grant or when employment ceases, whichever comes first, and vest over periods determined by the Board of Directors. There were 113,000 and 360,000 unexpired exercisable options remaining from the 1996 Plan at December 31, 2013 and 2012, respectively.

 

The status of the options issued under the foregoing option plans as of December 31, 2013, and changes during the years ended December 31, 2013 and 2012, were as follows:

 

    Options outstanding  
   

 

Number of shares

    Weighted average exercise price per share  
Balance at December 31, 2011     1,003,000     $ 0.31  
  Options granted     109,500       0.14  
  Options exercised     5,000       0.07  
  Options expired or forfeited     75,000       0.30  
Balance at December 31, 2012     1,032,500       0.29  
  Options granted     409,000       0.15  
  Options exercised, expired or forfeited     254,500       0.21  
Balance at December 31, 2013     1,187,000     $ 0.26  

 

 

The following table summarizes information about options at December 31, 2013:

 

Options outstanding     Options exercisable  

 

 

Total shares

   

 

Weighted average exercise price

    Weighted average remaining contractual life in years    

 

Aggregate intrinsic value

   

 

Total shares

   

 

Weighted average exercise price

    Weighted average remaining contractual life in years    

 

Aggregate intrinsic value

 
  1,187,000     $ 0.26       6.25     $ 11,418       755,750     $ 0.33       4.43     $ 3,920  
                                                             

 

Nonvested stock awards as of December 31, 2013 and changes during the year ended December 31, 2013, were as follows:

 

    Nonvested  
   

 

 

Number of shares

    Weighted average grant date fair value  
Balance at December 31, 2012     112,250     $ 0.08  
Granted     409,000       0.08  
Vested     90,000       0.08  
Balance at December 31, 2013     431,250       0.08  

 

As of December 31, 2013 and 2012, unrecognized compensation cost associated with non-vested share based employee and non-employee compensation totaled $16,723 and $3,094, respectively, which is expected to be recognized over a weighted average period of 7 months and 5 months, respectively.

 

Warrants

 

The Board of Directors may also grant warrants to directors, employees and others.  There were no warrants issued nor exercised during the years ended December 31, 2013 and 2012.  As of December 31, 2013 and 2012, there were no outstanding warrants.