Note 14 - Employee Equity Incentive Plans

9 Months Ended

Sep. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 14: EMPLOYEE EQUITY INCENTIVE PLANS

Stock Option Plan

Description of 2009 Equity Incentive Plan

In 2009, the Company’s Board of Directors and shareholders approved the 2009 Equity Incentive Plan of OmniComm Systems, Inc. (the “2009 Plan”). The 2009 Plan provides for granting Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Phantom Stock Unit Awards and Performance Share Units. Pursuant to the 2009 Plan, 7,500,000 shares of the Company’s common stock are authorized for issuance.

The maximum term for any option grant under the 2009 Plan is ten years from the date of the grant; however, options granted under the 2009 Plan will generally expire five years from the date of grant for most employees, officers and directors of the Company. Options granted to employees generally vest either upon grant or in two installments. The first vesting, which is equal to 50% of the granted stock options, occurs upon completion of one full year of employment from the date of grant and the second vesting occurs on the second anniversary of the date of grant. The vesting period typically begins on the date of hire for new employees and on the date of grant for existing employees. The restrictions on restricted shares granted to employees generally lapse in three equal annual installments on the anniversary of the date of grant.  Any unvested stock options or restricted shares with restrictions that have not lapsed that are granted under the 2009 Plan are forfeited and expire upon termination of employment.

As of September 30, 2014, there were 3,902,500 outstanding options and 2,625,000 restricted stock shares that have been granted under the 2009 Plan. At September 30, 2014, there were 972,500 shares available for grant as options or other forms of share-based compensation under the 2009 Plan.

Description of 1998 Stock Incentive Plan

In 1998, the Company’s Board of Directors and shareholders approved the 1998 Stock Incentive Plan of OmniComm Systems, Inc. (the “1998 Plan”). The 1998 Plan provides for granting Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Phantom Stock Unit Awards and Performance Share Units. Pursuant to the 1998 Plan, 12,500,000 shares of the Company’s common stock were authorized for issuance. The 1998 Plan expired as of December 31, 2008. As of September 30, 2014, there were 779,000 outstanding options that have been granted under the 1998 Plan.

The following table summarizes the stock option activity for the Company’s equity incentive plans:

						Weighted
				Weighted		average
				average		remaining
	Number of			exercise price		contractual term		Aggregate
	shares			(per share)		(in years)		intrinsic value
Outstanding at December 31, 2012		10,452,500		$	0.36		1.68	$	149,598
Granted		350,000			0.17
Exercised		(100,000	)		0.18
Forfeited/cancelled/expired		(4,957,500	)		0.42
Outstanding at December 31, 2013		5,745,000			0.29		1.70	$	93,945
Granted		150,000			0.16
Exercised		-0-			-0-
Forfeited/cancelled/expired		(1,213,500	)		0.54
Outstanding at September 30, 2014		4,681,500		$	0.23		1.35	$	115,650
Vested and exercisable at September 30, 2014		4,281,500		$	0.23		1.10	$	108,475

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company’s closing stock price at quarter-end and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on September 30, 2014.

The total number of shares vesting and the fair value of shares vesting for the nine month periods ended September 30, 2014 and September 30, 2013, respectively, was:

	Number of options		Fair value of
	vested		options vested
Fair value of options vesting during the nine months ended September 30, 2014		570,834	$	66,389
Fair value of options vesting during the nine months ended September 30, 2013		593,833	$	62,204

Cash received from stock option exercises for the nine month periods ended September 30, 2014 and September 30, 2013 was $-0- and $-0-, respectively. Due to the Company’s net loss position, no income tax benefit has been realized during the nine month periods ended September 30, 2014 and September 30, 2013.

The following table summarizes information concerning options outstanding at September 30, 2014:

Awards breakdown by price range at September 30, 2014
			Outstanding						Vested
											Weighted
					Weighted		Weighted				average
					average		average				remaining		Weighted
Strike price			Outstanding		remaining		outstanding		Vested stock		vested		average vested
range ($)			stock options		contractual life		strike price		options		contractual life		strike price
0.00	to	0.20		3,302,500		1.55	$	0.15		2,952,500		1.25	$	0.15
0.21	to	0.29		600,000		1.18		0.24		550,000		0.95		0.25
0.30	to	0.49		80,000		0.23		0.38		80,000		0.23		0.38
0.50	to	0.70		699,000		0.68		0.55		699,000		0.68		0.55
0.00	to	0.70		4,681,500		1.35	$	0.23		4,281,500		1.10	$	0.23

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

Awards breakdown by price range at December 31, 2013
			Outstanding						Vested
											Weighted
					Weighted		Weighted				average
					average		average				remaining		Weighted
Strike price			Outstanding		remaining		outstanding		Vested stock		vested		average vested
range ($)			stock options		contractual life		strike price		options		contractual life		strike price
0.00	to	0.20		3,251,000		2.16	$	0.15		2,530,166		1.86	$	0.16
0.21	to	0.29		750,000		1.64		0.25		650,000		1.20		0.25
0.30	to	0.49		110,000		0.98		0.38		110,000		0.98		0.38
0.50	to	0.70		1,634,000		0.87		0.59		1,634,000		0.87		0.59
0.00	to	0.70		5,745,000		1.70	$	0.29		4,924,166		1.42	$	0.32

The weighted average fair value (per share) of options granted during the nine month period ended September 30, 2014 was $0.16 and $0.17 during the nine month period ended September 30, 2013. The Black Scholes option-pricing model was utilized to calculate these values.

Basis for Fair Value Estimate of Share-Based Payments

Based on analysis of its historical volatility, the Company expects that the future volatility of its share price is likely to be similar to the historical volatility the Company experienced since the Company’s commercialization activities were initiated during the second half of 2000. The Company used a volatility calculation utilizing the Company’s own historical volatility to estimate its future volatility for purposes of valuing the share-based payments that have been granted. Actual volatility, and future changes in estimated volatility, may differ substantially from the Company’s current estimates.

The Company utilizes the historical data available regarding employee and director exercise activity to calculate an expected life of the options. The table below presents the weighted average expected life in years of options granted under the Plan as described above. The risk-free rate of the stock options is based on the U.S. Treasury yield curve in effect at the time of grant, which corresponds with the expected term of the option granted.

Below are the assumptions for the fair value of share-based payments for the nine month periods ended September 30, 2014 and September 30, 2013.

	Stock option assumptions for the nine months ended
Stock option assumptions	September 30, 2014		September 30, 2013
Risk-free interest rate		0.93%		0.70%
Expected dividend yield		0.0%		0.0%
Expected volatility		199.0%		203.4%
Expected life of options (in years)		5		5

The following table summarizes weighted average grant date fair value activity for the Company’s incentive stock plans:

	Weighted average grant date fair value
	2014		2013
Stock options granted during the nine month period ended September 30,	$	0.16	$	0.17
Stock options vested during the nine month period ended September 30,	$	0.12	$	0.10
Stock options forfeited during the nine month period ended September 30,	$	0.43	$	0.28

A summary of the status of the Company’s non-vested shares underlying stock options as of September 30, 2014, and changes during the nine month period ended September 30, 2014 is as follows:

	Shares underlying stock		Weighted average grant
	options		date fair value
Nonvested shares at January 1, 2014		820,834	$	0.13
Nonvested shares at September 30, 2014		400,000	$	0.16

As of September 30, 2014, approximately $39,697 of total unrecognized compensation cost related to unvested stock options is expected to be recognized over a weighted-average period of 1.2 years.