WaveDancer, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

3. Stock-Based Compensation

3. Stock-Based Compensation

3 Months Ended

Mar. 31, 2016

At March 31, 2016, the Company had two stock-based compensation plans described in Note 9 of the Annual Report. Total compensation expense related to these plans was $666 and $2,871 for the quarters ended March 31, 2016 and 2015, respectively, none of which related to options awarded to non-employees. The Company estimates the fair value of options granted using a Black-Scholes valuation model to establish the expense. When stock-based compensation is awarded to employees, the expense is recognized ratably over the vesting period. When stock-based compensation is awarded to non-employees, the expense is recognized over the period of performance. The fair values of option awards granted in the three months ended March 31, 2016 and 2015, were estimated using the Black-Scholes option pricing model using the following assumptions:

	Three Months ended March 31,
	2016	2015
Risk free interest rate	1.15% - 1.55%	1.61% - 1.97%
Dividend yield	0%	0%
Expected term	5 years	5-10 years
Expected volatility	34.9% - 35.0%	41.2% - 54.2%

The status of the options issued as of March 31, 2016 and changes during the three months ended March 31, 2016 and 2015 were as follows:

	Options outstanding
	Number of shares			Weighted average exercise price per share
Balance at December 31, 2015		1,193,000		$	0.24
Options granted		50,000			0.14
Options exercised		-			-
Options expired or forfeited		(3,000	)		0.70
Balance at March 31, 2016		1,240,000		$	0.24

	Options outstanding
	Number of shares			Weighted average exercise price per share
Balance at December 31, 2014		1,264,000		$	0.26
Options granted		20,000			0.20
Options exercised		-			-
Options expired or forfeited		(1,000	)		0.24
Balance at March 31, 2015		1,283,000		$	0.26

The following table summarizes information about options at March 31, 2016:

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
	1,240,000	$	0.24		4.82	$	7,093		1,145,500	$	0.25		4.49	$	6,073

Nonvested option awards as of March 31, 2016 and changes during the three months ended March 31, 2016 were as follows:

	Nonvested
	Number of shares			Weighted average grant date fair value
Balance at December 31, 2015		49,500		$	0.07
Granted		50,000			0.04
Vested		(5,000	)		0.08
Expired before vesting		-			-
Balance at March 31, 2016		94,500		$	0.05

As of March 31, 2016 and 2015, unrecognized compensation cost associated with non-vested share-based compensation totaled $2,741 and $6,801, respectively, which are expected to be recognized over weighted average periods of seven months and six months, respectively.