STOCK BASED COMPENSATION

3 Months Ended

Mar. 31, 2014

Restricted Shares of Common Stock

During the three months ended March 31, 2013, the Company issued 220,000 restricted share grants to consultants and directors as compensation for services, the Company did not issue restricted share grants in the three months ended March 31, 2014.

The Company recognized $66,625 and $81,000 in stock compensation expense related to restricted share grants and is included in selling, general and administrative expenses in the consolidated statement of operations for the three months ended March 31, 2014, and 2013, respectively. As of March 31, 2014, there was approximately $33,313 in unrecognized compensation cost related to restricted share awards and the related weighted-average period over which it is to be amortized is approximately two (2) month

Stock Warrants

Historically, the Company issued warrants to purchase common stock to employees and consultants as compensation for services. The Company amortizes the fair value of the stock warrants to expense ratably over the related service period.

The following table summarizes the warrants outstanding and the number of shares of common stock subject to exercise as of March 31, 2014 and December 31, 2013:

	Employees				Services

	Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price


Outstanding and Exercisable at December 31, 2013		-	$	-		850,000	$	0.96

Warrants granted		-		-		-		-
Warrants exercised		-		-		-		-
Warrants expired/cancelled		-		-		-		-

Outstanding and Exercisable at March 31, 2014 (unaudited)		-	$	-		850,000	$	0.96

The following table summarizes information about stock warrants outstanding and exercisable as of March 31, 2014:

	Outstanding						Exercisable

Range of Exercise Price	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Life (Years)		Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Life (Years)

$0.65		600,000	$	0.65		4.07		600,000	$	0.65		4.07

$1.52 - $1.80		250,000	$	1.69		2.23		250,000	$	1.69		2.23

Stock compensation expense related to stock warrants for the three months ended March 31, 2014 and 2013 was $0 and $84,716, respectively. As of March 31, 2014, there was no unrecognized compensation cost related to stock warrant awards.

Stock Options

In May 2012, we adopted the Assured Pharmacy, Inc. 2012 Incentive Compensation Plan (the “2012 Incentive Plan”). The 2012 Incentive Plan is intended to provide incentives that will attract and retain the best available directors, employees and appropriate third parties who can provide us with valuable services. These purposes may be achieved through the grant of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock awards, performance stock awards and phantom stock awards.

The 2012 Incentive Plan permits the grant of awards that may deliver up to an aggregate of 1,667,667 shares of common stock, further subject to limits on the number of shares that may be delivered pursuant to incentive stock options, on the shares that may be delivered on the awards to any individual in a single year and on the number of shares that may be delivered on certain awards that are performance-based awards, within the meaning of Section 162(m) of the Internal Revenue Code. Awards may vest, in time, upon the occurrence of one or more events or by the satisfaction of performance criteria, or any combination. To the extent that awards are performance based, they may be based on one or more criteria, including (without limitation) earnings, cash flow, revenues, operating income, capital reissues, or other quantifiable company, customer satisfaction or market data, or any combination. In addition to common stock, awards may also be made in similar securities whose value is derived from our common stock.

Awards with respect to which grant, vesting, exercisability or payment depend on the achievement of performance goals and awards that are options or stock appreciation rights granted to officers and employees will be intended to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Internal Revenue Code. The 2012 Incentive Plan will be administered by the board of directors.

At March 31, 2014, all options outstanding and exercisable are out of the money and accordingly, their intrinsic value is zero.

The following table summarizes the stock options outstanding and the number of shares of common stock subject to exercise as of March 31, 2014 and December 31, 2013:

	Options Outstanding				Options Exercisable
	Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price

Outstanding at December 31, 2013		1,840,556	$	0.66		1,840,556	$	0.66

Options granted		-		-		-		-
Options vested		-		-		-		-
Options exercised		-		-		-		-
Options expired/cancelled		-		-		-		-

Outstanding at March 31, 2014 (unaudited)		1,840,556	$	0.66		1,840,556	$	0.66

The following table summarizes information about stock options outstanding and exercisable as of March 31, 2014:

		Outstanding						Exercisable

Exercise Price		Stock Options Outstanding		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term in Years		Stock Options Exercisable		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term in Years

$	0.60		525,000	$	0.60		8.11		525,000	$	0.60		8.11

$	0.68		1,305,556	$	0.68		7.00		1,305,556	$	0.68		7.00

$	1.26		10,000	$	1.26		5.95		10,000	$	1.26		5.95

The Company recorded stock based compensation expense related to stock options for the three months ended March 31, 2014 and 2013 of $0 and $38,064, respectively, which is reflected in selling, general and administrative expense in the condensed consolidated statement of operations. As of March 31, 2014, there was no unrecognized compensation cost related to stock option awards.

The Company has reserved at total of 2,690,556 shares of its common stock for incentive stock option and warrant awards outstanding to employees and consultants and an additional 1,142,667 shares of common stock for unissued options per the 2012 Incentive Plan. The Company does not expect to repurchase shares during the year 2014.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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