Stock-Based Compensation

3 Months Ended

Mar. 31, 2014

5. Stock-Based Compensation

Incentive Stock Plan

On August 17, 2007, the Company's board of directors adopted and implemented the Company's 2007 Incentive Stock Plan. Under the Incentive Stock Plan, the Company is authorized to issue 4,000,000 shares of its common stock to the Company's directors, officers, employees, advisors or consultants.

Any Incentive Stock Option granted to an employee of the Company shall become exercisable over a period of no longer than 5 years, and no less than 20% of the shares covered thereby shall become exercisable annually. 20% of shares vest annually beginning on the first anniversary of the grant. The options expire 5 years from the grant date.

The Company issued 1,500,000 options pursuant to this plan during the three month period ended March 31, 2014.

Stock Compensation Plan

On August 17, 2007, the Company's board of directors adopted and implemented the Company's 2007 Stock Compensation Plan. The total number of shares of the Company's common stock which may be purchased or granted directly by Options, Stock Awards or Warrants under the Compensation Plan shall not exceed 4,000,000 shares of the Company's common stock.

Awards granted to a participant of the Company shall become exercisable over a period of no longer than 5 years, and may vest as determined at the Company's discretion at the time of grant.

The Company issued no stock options pursuant to this plan during the three month period ended March 31, 2014.

A summary of the shares reserved for grant and awards available for grant under each Stock Plan is as follows:


	March 31, 2014
		Shares Reserved for Grant	Awards Available for Grant

Incentive Stock Plan		4,000,000	1,935,000
Stock Compensation Plan		4,000,000	3,925,000
		8,000,000	5,860,000

The Company issues awards to employees, qualified consultants and directors that generally vest over time based solely on continued employment or service during the related vesting period and are exercisable over a five to ten year service period. Options are generally granted with an exercise price equal to the market price of the Company's stock at the date of grant.

The fair value of each stock-based award is estimated on the grant date using the Black-Scholes option-pricing model. Expected volatilities are based on the historical volatility of the Company's stock price. The expected term of options granted subsequent to the adoption ASC 718 is derived using the simplified method as defined in the SEC's SAB No. 107. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury interest rates in effect at the time of grant. The fair value of options granted was estimated using the following weighted-average assumptions:


	For the three month periods Ended March 31
	2014		2013

Expected term (in years)	5.0		5.0
Expected volatility	125.0	%	99.1	%
Risk-free interest rate	1.5	%	1.0	%
Dividend yield	0.0	%	0.0	%

A summary of activity under the Stock Plans and changes during the three month period ended March 31, 2014 is presented below:


			Weighted-Average
	Shares		Exercise Price		Remaining Contractual Term (Years)		Aggregate Intrinsic Value

Outstanding at December 31, 2013		640,000	$	0.22		1.63	$	-
Issued		1,500,000		0.13		-		-
Cancelled/forfeited		-		-
Exercised		-		-
Outstanding at March 31, 2014		2,140,000	$	0.15		3.88	$	-
Options expected to vest		2,140,000	$	0.15		3.88	$	-
Options exercisable at end of period		527,500	$	0.22		1.22	$	-

For the three month periods ended March 31, 2014 and 2013, the Company recognized $3,765 and $41,508 of stock-based compensation expense, respectively. As of March 31, 2014 there was $17,625 of total unrecognized compensation cost, net of forfeitures, related to unvested employee and director stock option compensation arrangements. That cost is expected to be recognized on a straight-line basis over the next 3.88 weighted average years.

- 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.

+ References+ Details

Cornerworld Corp 10-Q