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Stockholders' Equity
 12 Months Ended
Dec. 31, 2013
Stockholders' Equity [Abstract]  
Stockholders' Equity
7.         Stockholders’ Equity
 
During 2013, the Company raised $125,000 in a common stock offering at $0.25 per share.  Each two shares of common stock issued included a three-year warrant for one share exercisable at $0.40.  The Company raised an additional $50,000 through the exercise of 500,000 options.  The Company issued 195,000 common shares for services valued at $48,750.
 
During 2013, the Company extended the expiration date of 500,000 options and 1,500,000 warrants one year from 2013 to 2014 and issued an additional 575,000 options as discussed below.  As a result of these transactions, and the amortization of options granted in 2012, the Company recorded a charge to stock-based compensation expense of $102,000 and interest expense of $3,000 during the year ended December 31, 2013.
 
During 2012, the Company raised $313,383 in a common stock offering at $0.17 per share. In addition, $293,943 of notes and other payables were converted into common stock under the same terms as the common stock offering. Each two shares of common stock issued included a three-year warrant for one share exercisable at $0.40. The Company raised an additional $32,500 and satisfied notes payable in the amount of $17,500 through the exercise of 500,000 options. The Company issued 719,440 common shares for services valued at $122,305.
 
During 2012, the Company extended the expiration date of 1,000,000 options and 1,500,000 warrants one year from 2012 to 2013, and issued an additional 1,400,000 options as discussed below. As a result of this transaction, the Company recorded a charge to stock-based compensation expense of $84,000 during the year ended December 31, 2012.
 
Service-Based Stock Options
 
During 2013 the Company issued 525,000 options to three consultants at exercise prices between $0.20 and $0.40 per share.  All of these options vested fully during 2013 and expire in 10 years.  Additionally, during October 2013 the Company issued 50,000 options with an exercise price of $0.25 in conjunction with short term financing.  These options are fully vested and expire in 3 years.
 
During 2012, the Company issued 1,200,000 options to three consultants at an exercise price of $0.20 per share that expire in 10 years. Of these options, 200,000 vest immediately and 1,000,000 vest fully in June 2013. Additionally, during June 2012 the Company also issued 200,000 options to employees with an exercise price of $0.20. These options expire in 10 years and vest semi-annually over 2 years.
 
A summary of the outstanding service-based stock options are as follows:
 
   
Number of Options
  
       
Balance at December 31, 2011
     9,342,500  
Granted
     1,400,000  
Exercised
     (500,000 )
Expired
     (287,500 )
         
Balance at December 31, 2012
     9,955,000  
Granted
     575,000  
Exercised
     (500,000 )
Expired
     (145,000 )
         
Balance at December 31, 2013
     9,885,000  
 
Options exercisable at December 31, 2013 and 2012, amounted to 9,835,000 and 9,305,000, respectively.
 
All outstanding options have a cashless exercise provision, and certain options provide for accelerated vesting provisions and modifications, as defined, if the Company is sold or acquired.
 
The intrinsic value of options outstanding and exercisable amounted to $448,350 and $110,650 at December 31, 2013 and December 31, 2012, respectively. The intrinsic value of options exercised in 2013 and 2012 amounted to $100,000 and $35,000, respectively.
 
The following is a summary of outstanding service-based options at December 31, 2013:
 
Exercise Price
    
Number of Options
  
Weighted Average Remaining Contractual Life
           
$0.10     $ 1,000,000  
4 years
$0.20 - $0.25       7,735,000  
8 years
$0.40       1,150,000  
8 years
Total
     $ 9,885,000    
 
The fair value of the 575,000 options granted in 2013 amounted to $44,000 which has been expensed during the year.  All options granted during 2013 are fully vested.  The 1,400,000 options issued in 2012 vest over one and two year periods through June 2014. The fair value of the 1,400,000 options issued in 2012 is $97,000, of which $93,500 has been expensed as of December 31, 2013, and $3,500 remained unearned, and will be expensed over the next 6 months.  All the other options issued through December 31, 2013 are fully vested.
 
Stock based compensation expense amounted to $105,000 and $84,000 for the years ended December 31, 2013 and 2012, respectively. Such amounts are included in compensation and related expenses ($102,000 in 2013 and $84,000 in 2012) and interest expense ($3,000 in 2013) in the accompanying statement of operations.
 
Performance-Based Stock Options
 
As of December 31, 2013 the Company had granted performance-based options to purchase 6,950,000 shares of common stock at exercise prices ranging from $0.40 to $5.00.  The options expire at various dates between 2021 and 2023 and are exercisable upon the Company achieving annual sales revenue ranging from $5,000,000 and $100,000,000.  The fair value of these performance-based options aggregated $302,000 and will be expensed over the implicit service period commencing once management believes the performance criteria will be met.  Accordingly, at December 31, 2013 the unearned compensation for performance based options is $302,000.
 
Warrants
 
The following is a summary of outstanding and exercisable warrants:
 
   
Number of Shares
    
Weighted
 Average
Exercise
 Price
    
Year
of
Expiration
  
                   
Balance at December 31, 2011
     1,715,000     0.16     2012 - 2013  
Granted
     2,037,720     0.40     2015  
Expired
     (115,000 )   0.40     2012  
                     
Balance at December 31, 2012
     3,637,720     0.28     2013 - 2015  
Granted
     250,000     0.40     2016  
Balance at December 31, 2013
     3,887,720     0.29     2014 - 2016  
 
In connection with the issuance of common stock in 2013 the Company granted warrants to acquire 250,000 shares of common stock at $0.40 per share.  Theses warrants are immediately exercisable and expire in 2016
 
In connection with the issuance of common stock in 2012, the Company granted warrants to acquire 2,037,720 shares of common stock at $0.40 per share. These warrants are immediately exercisable and expire in 2015.
 
The fair value of options and warrants granted (or extended) during the years ended December 31, 2013 and 2012, was estimated on the date of grant (or extension) using the Black-Scholes option-pricing model with the following weighted-average assumptions:
 
   
2013
    
2012
  
             
Expected volatility
     50 %     50 %
Risk free interest rate
     2 %     2 %
Expected dividend yield
     -       -  
Expected option term (in years)
     1 - 5       1.5 - 5  
Weighted average grant date fair value
   $ 0.08     $ 0.06