Note 8 - Stock-Based Compensation and Other Employee Benefit Plans

3 Months Ended

Mar. 31, 2014

Disclosure Text Block Supplement [Abstract]

Compensation and Employee Benefit Plans [Text Block]

Note 8.   Stock-Based Compensation and Other Employee Benefit Plans

2007 Equity Incentive Plan

There were no options issued as part of the 2007 Equity Incentive Plan.

Activity for our stock options under the 2007 Plan for the three-month periods ended March 31, 2013 and 2014 is as follows:

As of March 31, 2013:	Options Outstanding		Shares Available		Exercise Price per share				Weighted Average Price per share
Balances as of December 31, 2012		8,521,086		4,460,742	$	0.23	–	1.89	$	0.44
Granted		—		—			—			—
Exercised		—		—			—			—
Canceled		—		—			—			—
Balances as of March 31, 2013		8,521,086		4,460,742	$	0.23	–	1.89	$	0.44

As of March 31, 2014:	Options Outstanding		Shares Available		Exercise Price per share				Weighted Average Price per share
Balances as of December 31, 2013		8,561,086		4,420,742	$	0.23	–	1.89	$	0.44
Granted		—		—			—			—
Exercised		—		—			—			—
Canceled		—		—			—			—
Balances as of March 31, 2014		8,561,086		4,420,742	$	0.23	–	1.89	$	0.44

Options issued Outside of the 2007 Equity Incentive Plan

During the three-month periods ended March 31, 2013 and 2014 we recorded an aggregate $19,000 and $156,711 in selling general and administrative expense related to options issued outside of the 2007 Plan.

On March 31, 2014, we issued Options to purchase 156,888 shares of our common stock at an exercise price of $0.43 per share to our board of directors, in lieu of $45,000 in accrued and unpaid fees. The fair value of the Options totaled $67,461, resulting in $22,461 of additional selling, general and administrative expenses.

On March 31, 2014, we issued Options to purchase 78,488 shares of our common stock at an exercise price of $0.43 per share to a vendor, in lieu of $22,500 in accrued and unpaid fees. The fair value of the Options totaled $33,750, resulting in $11,250 of additional selling, general and administrative expenses.

Activity of our stock options issued outside of the 2007 Plan for the three-month periods ended March 31, 2013 and 2014 is as follows:

As of March 31, 2013:	Options Outstanding		Exercise Price per share				Weighted Average Price per share
Balances as of December 31, 2012		13,338,220	$	0.18	–	1.00	$	0.41
Granted		—			—			—
Exercised		—			—			—
Canceled		—			—			—
Balances as of March 31, 2013		13,338,220	$	0.18	–	1.00	$	0.41

As of March 31, 2014:	Options Outstanding		Exercise Price per share				Weighted Average Price per share
Balances as of December 31, 2013		16,398,395	$	0.18	–	1.00	$	0.39
Granted		235,376	$		0.43		$	0.43
Exercised		—			—			—
Canceled		—			—			—
Balances as of March 31, 2014		16,633,771	$	0.18	–	1.00	$	0.39

We recognize compensation expense for stock option awards on a straight-line basis over the applicable service period of the award, which is the vesting period. Share-based compensation expense is based on the grant date fair value estimated using the Black-Scholes Option Pricing Model. The following methodology and assumptions were used to calculate share based compensation for the three-month period ended March 31:

	2013				2014
	Non Plan		2007 Plan		Non Plan			2007 Plan
Risk free interest rate		—		—		2.73	%		—
Expected volatility		—		—		935	%		—
Expected dividend yield		—		—		—			—
Forfeiture rate		—		—		—			—
Expected life in years		—		—		7			—

Expected price volatility is the measure by which our stock price is expected to fluctuate during the expected term of an option. Expected volatility is derived from the historical daily change in the market price of our common stock, as we believe that historical volatility is the best indicator of future volatility.

The risk-free interest rate used in the Black-Scholes calculation is based on the prevailing U.S Treasury yield as determined by the U.S. Federal Reserve. We have never paid any cash dividends on our common stock and do not anticipate paying cash dividends on our common stock in the foreseeable future.

We recognize compensation expense for stock option awards on a straight-line basis over the applicable service period of the award, which is the vesting period. Share-based compensation expense is based on the grant date fair value estimated using the Black-Scholes Option Pricing Model. Historically, we have not had significant forfeitures of unvested stock options granted to employees and Directors. A significant number of our stock option grants are fully vested at issuance or have short vesting provisions. Therefore, we have estimated the forfeiture rate of our outstanding stock options as zero.