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

6 Months Ended

Jun. 30, 2015

At June 30, 2015, the Company had two stock-based compensation plans described in Note 9 of the Annual Report. Total compensation expense related to these plans was $2,843 and $3,551 for the quarters ended June 30, 2015 and 2014, respectively, of which $0 and $0, respectively, related to options awarded to non-employees. Total compensation expense related to these plans was $5,714 and $8,805 for the six months ended June 30, 2015 and 2014, respectively. 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 and six months ended June 30, 2015 and 2014, were estimated using the Black-Scholes option pricing model using the following assumptions:

	Three Months ended June 30,		Six Months ended June 30,
	2015	2014	2015	2014
Risk free interest rate	1.61 1.97%	1.77%	1.61 1.97%	1.77%
Dividend yield	0%	0%	0%	0%
Expected term	5-10 years	5 years	5-10 years	5 years
Expected volatility	41.2 54.2%	47.3%	41.2 54.2%	47.3%

The status of the options issued as of June 30, 2015 and changes during the six months ended June 30, 2015 and 2014 were as follows:

	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
Options granted		--			--
Options exercised		--			--
Options expired or forfeited		(5,000	)		0.52
Balance at June 30, 2015		1,278,000		$	0.25

	Options outstanding
	Number of shares			Weighted average exercise price per share
Balance at December 31, 2013		1,187,000		$	0.26
Options granted		--			--
Options exercised		--			--
Options expired or forfeited		--			--
Balance at March 31, 2014		1,187,000		$	0.26
Options granted		1,000			0.24
Options exercised		--			--
Options expired or forfeited		(3,000	)		0.11
Balance at June 30, 2014		1,185,000		$	0.26

The following table summarizes information about options at June 30, 2015:

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
	1,278,000	$	0.25		5.13	$	19,128		1,064,500	$	0.27		4.40	$	13,777

Nonvested stock awards as of June 30, 2015 and changes during the six months ended June 30, 2015 were as follows:

	Nonvested
	Number of shares			Weighted average grant date fair value
Balance at December 31, 2014		209,500		$	0.07
Granted		20,000			0.11
Vested		(5,000	)		0.08
Expired before vesting		(1,000	)		0.10
Balance at March 31, 2015		223,500		$	0.08
Granted		--			--
Vested		(10,000	)		0.09
Expired before vesting		--			--
Balance at June 30, 2015		213,500		$	0.07

As of June 30, 2015 and 2014, unrecognized compensation cost associated with non-vested share-based compensation totaled $3,958 and $8,018, respectively, which are expected to be recognized over weighted average periods of 5 months and 6 months, respectively.