Stock Based Compensation

9 Months Ended

Sep. 30, 2014

Notes

Stock Based Compensation

4. STOCK BASED COMPENSATION

The following table summarizes the Company’s employee stock option activity for the nine months ended September 30, 2014:

	Options	Weighted average exercise price	Weighted average remaining contractual life (yrs)	Aggregate intrinsic value
Options outstanding, December 31, 2013	3,202,882	$          .030	9.10
Options exercisable, December 31, 2013	1,755,882	$0.027	8.75	$     42,261
Options granted during the period	7,500	$       0.036
Options expired during the period	(15,000)	$0.050
Options forfeited during the period	(4,000)	$0.043
Options outstanding, September 30, 2014	3,191,382	$0.029	8.40
Options exercisable, September 30, 2014	1,932,549	$0.025	8.10	$     13,488

During the nine months ended September 30, 2014, 7,500 nonqualified employee stock options were granted with exercise prices ranging from $0.026 to $0.050 and 3,000 of those options with an exercise price of $.050 were forfeited.  The options were valued using Black-Scholes option pricing model on the respective date of issuance and the fair value of the shares was determined to be $122 of which $10 was recognized as stock-based compensation expense for the nine months ended September 30, 2014. The stock options will vest one-third on each annual anniversary date of the grant and will expire ten years from the date of the grant.  During the nine months ended September 30, 2014, 1,000 employee stock options were forfeited that were related to options granted in the prior year.

Stock-based compensation expense for the three and nine months ended September 30, 2014 was $5,584 and $16,908, respectively. 

Stock-based compensation is measured at the grant date, based on the calculated fair value of the option, and is recognized as an expense on a straight-line basis over the requisite employee service period (generally the vesting period of the grant).    

The Black-Scholes option pricing model was used with the following weighted-average assumptions for options granted during the nine months ended September 30, 2014:

Risk-free interest rate 1.41%   -1.70%

Expected option life 5 years

Expected volatility 225% - 234%

Expected dividend yield 0%