4. Stock Option Plans and Agreements

9 Months Ended

Sep. 30, 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 12,012,833 shares of common stock.  Plan 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 nine months ended September 30, 2014 and 2013.

	2014			2013
Risk-free interest rate		.77% - 1.98	%		.34% - .2.15	%
Expected dividend yield		0	%		0	%
Expected stock price volatility		100	%		75	%
Expected life of options	3.25 - 5.75 years			3.25 - 5.75 years

The Company recorded expense for options issued to employees and independent service providers of $11,331 and $25,826 for the three months ended September 30, 2014 and 2013, respectively, and $86,226 and $76,742 for the nine months ended September 30, 2014 and 2013, respectively.

At September 30, 2014, there was approximately $94,000 of unrecognized compensation cost related to non-vested options.  This cost is expected to be recognized over a weighted average period of approximately two years.  The total fair value of shares that vested during the nine months ended September 30, 2014 was approximately $72,000.  The weighted average fair value of options granted during the nine months ended September 30, 2014 was approximately $.08 ($.09 during the nine months ended September 30, 2013).  No options were exercised during the nine months ended September 30, 2014 and 2013.

A summary of all stock option activity for the nine months ended September 30, 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		1,830,000		$	.12
Options expired		(342,667	)	$	.14
Options forfeited		(833,333	)	$	.13
Outstanding at September 30, 2014		9,874,500		$	.18	4.9 years	$	0
Exercisable at September 30, 2014		6,547,000		$	.20	4.5 years	$	0

During the nine months ended September 30, 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.  Additional expense will be recorded when it is probable the vesting criteria will be met. In addition, the Company issued (i) 920,000 common stock options to employees at an exercise price of $.115 per share of which 306,667 vested upon grant; (ii) 100,000 common stock options to an employee at an exercise price of $.04 of which 100,000 vested upon grant with the balances vesting over two years and (iii) 10,000 common stock options to an employee at an exercise price of $.065 which vests over three years.