4. Stock Option Plans and Agreements

3 Months Ended

Mar. 31, 2014

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

Stock Option Plans and Agreements

The Company has approved stock options plans and agreements covering up to an aggregate of 12,032,833 shares of common stock.  Such options may be designated at the time of grant as either incentive stock options or nonqualified stock options.  Stock based compensation consists of charges for stock option awards to employees, directors and consultants.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model.  The following assumptions were used for the three months ended March 31, 2014 and 2013:

	2014			2013
Risk-free interest rate		.77% - 1.98	%		1.00% - 1.14	%
Expected dividend yield		0	%		0	%
Expected stock price volatility		100	%		75	%
Expected life of options	3.25 to 5.75 years			5.75 years

The Company recorded expense for options issued to employees and independent service providers of $58,805 and $36,399 for the three months ended March 31, 2014 and 2013, respectively.

At March 31, 2014, there was approximately $123,000 of total unrecognized compensation cost related to non-vested options.  That cost is expected to be recognized over a weighted average period of approximately 1.4 years.  The total fair value of shares that vested during the three months ended March 31, 2014 was approximately $45,000.

A summary of all stock option activity for the three months ended March 31, 2014 follows:

	Number of Options			Weighted Average Exercise Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at December 31, 2013		9,220,500		$	.18
Options granted		1,720,000		$	.12
Options expired		(31,000	)	$	.01
Outstanding at March 31, 2014		10,909,500		$	.18	5.3 years	$	2,000
Exercisable at March 31, 2014		6,583,667		$	.20	4.8 years	$	2,000

During the three months ended March 31, 2014, the Company issued 800,000 common stock options to an employee at an exercise price of $.13 per share.  At issuance, 200,000 options immediately vested.  The balance of the options vest based on meeting specific sales performance criteria. In addition, the Company issued 920,000 common stock options to employees at an exercise price of $.115 per share of which 306,667 vested upon grant and the balance vests over two years.