Quarterly report pursuant to sections 13 or 15(d)

4. STOCK OPTION PLAN AND STOCK-BASED COMPENSATION

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4. STOCK OPTION PLAN AND STOCK-BASED COMPENSATION
6 Months Ended
Jun. 30, 2013
Notes to Financial Statements  
NOTE 4 - STOCK OPTION PLAN AND STOCK-BASED COMPENSATION

 

3.           STOCK OPTION PLAN AND STOCK-BASED COMPENSATION

 

During the period ended March 31, 2013, the board of directors of the Company approved an amendment of the stock option plan entitled “The 2010 Stock Plan” (2010 Plan) to increase the number of shares which the Company may grant options to purchase shares of common stock from 5,000,000 to 7,500,000. As of June 30, 2013 and December 31, 2012, there were 578,400 options outstanding under the 2010 Plan, respectively. The amendment will be effective on September 7, 2013, after notifying stockholders.

 

During the period ended March 31, 2013, the Company amended the non-qualified stock option plan entitled “2011 Non-Qualified Stock Plan” (2011 Plan) to increase the number of shares which the Company may grant options to purchase shares of common stock from 12,000,000 to 17,500,000. As of June 30, 2013 and December 31, 2012, there were 7,348,000 and 7,130,000 options outstanding under the 2011 Plan, respectively.

 

Under the terms of the stock plans, the Board of Directors shall specify the exercise price and vesting period of each stock option on the grant date. Vesting of the options is typically three to four years and the options typically expire ten years from the date of grant.

 

The fair value of stock options granted or revalued for three and six months ended June 30, 2013 and 2012 was calculated with the following assumptions:

 

              2013   2012
Risk-free interest rate   0.49% - 1.55%   0.43% - 1.27%
Expected dividend yield   0%   0%
Volatility factor     85%   90%
Expected life of option   4.50 to 6 years   3.15 to 7 years

 

The weighted-average fair value of stock options granted during the periods ended June 30, 2013 and 2012, under the Black-Scholes option pricing model was $0.25 and $0.21 per share, respectively.

 

The Company recognized $192,864 and $43,384 of stock-based compensation costs in the accompanying statement of operations for the three months ended June 30, 2013 and 2012, respectively. The Company recognized $385,031 and $116,866 of stock-based compensation costs in the accompanying statement of operations for the six months ended June 30, 2013 and 2012, respectively. No actual tax benefit was realized from stock option exercises during these periods. As of June 30, 2012, there was approximately $1,283,000 of unrecognized compensation expense related to non-vested stock option awards that is expected to be recognized over a weighted average period of 2.0 years.

 

    Shares     Exercise Price per Share     Weighted Average Exercise Price per Share  
Outstanding as of December 31, 2012     7,708,400     $ 0.10-1.85     $ 0.42  
      Granted     218,000       0.42-1.00       0.74  
      Exercised     -       -       -  
      Options forfeited/cancelled     -       -       -  
Outstanding as of June 30, 2013     7,926,400     $ 0.10-1.85     $ 0.43  

 

The following table summarizes information about stock options that are vested or expected to vest at June 30, 2013:

 

Vested or Expected to Vest     Exercisable Options  
            Weighted     Weighted                 Weighted     Weighted        
            Average     Average                 Average     Average        
            Exercise     Remaining     Aggregate     Number     Exercise     Remaining     Aggregate  
Exercise     Number of     Price Per     Contractual     Intrinsic     of     Price     Contractual     Intrinsic  
Price     Options     Share     Life (Years)     Value     Options     Per Share     Life (Years)     Value  
$ 0.10       1,800,000     $ 0.10       3.38     $ 450,000       1,518,750     $ 0.10       3.41     $ 379,688  
  0.42       98,000       0.42       7.51       -       -       0.42       -       -  
  0.50       5,830,000       0.50       4.64       -       1,892,501       0.50       5.04       -  
  1.00       120,000       1.00       5.51       -       60,000       1.00       5.51       -  
  1.85       78,400       1.85       2.25       -       78,400       1.85       2.25       -  
$ 0.10-1.85       7,926,400     $ 0.43       4.38     $ 450,000     3,549,651     $ 0.32       4.29     $ 379,688  

 

The weighted-average remaining contractual life for stock options exercisable at June 30, 2013 is 4.29 years. At June 30, 2013, the Company has 10,152,000 and 4,421,600 options available for grant under the 2011 Plan and 2010 Plan, respectively. The intrinsic value for fully vested, exercisable options was $379,688 and $418,000 at June 30, 2013 and December 31, 2012, respectively. No actual tax benefit was realized from stock option exercises during these periods.