Quarterly report pursuant to Section 13 or 15(d)

STOCK WARRANTS, OPTIONS AND GRANTS

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STOCK WARRANTS, OPTIONS AND GRANTS
 9 Months Ended
Sep. 30, 2014
Notes to Financial Statements  
STOCK WARRANTS AND OPTIONS

Warrant activity. We have accounted for warrants as equity instruments in accordance with EITF 00-19 (ASC 815-40) Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, and as such, will be classified in stockholders’ equity as they meet the definition of “…indexed to the issuer’s stock” in EITF 01-06 (ASC 815-40) The Meaning of Indexed to a Company’s Own Stock. In prior years, we estimated the fair value of the warrants using the Black-Scholes option pricing model based on assumptions at the time of issuance.

 

A summary of current warrant activity is as follows:

 

    Common Stock Warrants   Weighted Average Exercise Price
  Outstanding – January 1, 2013       1,330,953     $ 0.45  
       Issued       —         —    
       Exercised       —         —    
       Expired       (714,286 )     0.40  
  Outstanding – December 31, 2013       616,667       0.51  
       Issued       —         —    
       Exercised       —         —    
       Expired       (441,667 )     0.40  
  Outstanding – September 30, 2014       175,000     $ 0.80  
  Exercisable – September 30, 2014       —         —    

  

Stock options. For the nine months ended September 30, 2014 and 2013, we issued 193,750 and -0- stock options, respectively. Stock options issued to members of our Board of Directors were 100,000 and -0- for the nine months ended September 30, 2014 and 2013, respectively. Stock options issued to independent contractors were 93,750 and -0- for the nine months ended September 30, 2014 and 2013, respectively. The stock options granted for the nine months ended September 30, 2014 were calculated to have a fair value of $53,775 using the Black-Scholes option pricing model with the following assumptions:

 

    Options Issued
Nine Months Ended
September 30, 2014
Dividend yield     0 %
Expected volatility           86% to 90%  
Risk free interest rate           1.62% to 1.78%  
Expected life (years)     5.00  

 

A summary of stock option activity is as follows:

 

    Common Stock Options   Weighted Average Exercise Price
  Outstanding – January 1, 2013       100,000     $ 0.25  
       Issued       —         —    
       Exercised       —         —    
       Expired       —         —    
  Outstanding – December 31, 2013       100,000       0.25  
       Issued       193,750       0.41  
       Exercised       —         —    
       Expired       —         —    
  Outstanding – September 30, 2014       293,750     $ 0.35  
  Exercisable – September 30, 2014       268,750     $ 0.36  

 

Stock grants. For the nine months ended September 30, 2014 and 2013, we granted a total of 300,000 and -0- shares of common stock, respectively. Stock granted to our Board of Directors was 175,000 and -0- shares for the nine months ended September 30, 2014 and 2013. Stock granted to independent contractors was 125,000 and -0- shares for the nine months ended September 30, 2014 and 2013.

 

Share based compensation. The cost of all stock options and stock grants issued have been classified as share based compensation for the nine months ended September 30, 2014 and 2013, respectively. Total share based compensation was $139,378 and $4,354 for the nine months ended September 30, 2014 and 2013, respectively. The share based compensation is included in selling, general & administrative expenses on the statement of operations.