Stock Plans and Stock-Based Compensation

12 Months Ended

Dec. 31, 2015

Stock Plans and Stock-Based Compensation [Abstract]

STOCK PLANS AND STOCK-BASED COMPENSATION

12. STOCK PLANS AND STOCK-BASED COMPENSATION

In 1998, the Board adopted the 1998 Stock Option Plan (“1998 Plan”), which was subsequently approved by the shareholders. The 1998 Plan, as amended, authorizes the granting of awards, the exercise of which would allow up to an aggregate of 6,375,000 shares of Andrea’s Common Stock to be acquired by the holders of those awards. The awards can take the form of stock options, stock appreciation rights, restricted stock, deferred stock, stock reload options or other stock-based awards. Awards may be granted to key employees, officers, directors and consultants. No further awards will be granted under the 1998 Plan.

In October 2006, the Board adopted the Andrea Electronics Corporation 2006 Equity Compensation Plan (“2006 Plan”), which was subsequently approved by the shareholders. The 2006 Plan, as amended, authorizes the granting of awards, the exercise of which would allow up to an aggregate of 18,000,000 shares of Andrea’s Common Stock to be acquired by the holders of those awards. The awards can take the form of stock options, stock appreciation rights, restricted stock or other stock-based awards. Awards may be granted to key employees, officers, directors and consultants. At December 31, 2015, there were 1,677,436 shares available for further issuance under the 2006 Plan.

The stock option awards granted under these plans have been granted with an exercise price equal to the market price of the Company’s stock at the date of grant; with vesting periods of up to four years and 10-year contractual terms. The fair values of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model that uses the weighted-average assumptions noted in the following table. Expected volatilities are based on implied volatilities from historical volatility of the Company’s stock. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.During the year ended December 31, 2015, Andrea granted 600,000 shares of common stock options with a weighted average fair market fair of $0.06 per share. The grants provide for up to a three-year vesting period, a weighted average exercise price of $0.06 per share, which was the fair market value of the Company’s common stock at the date of grant and a weighted average expected life of 8 years. The fair values of the 600,000 stock options granted was $38,000 which was estimated on the date of grant using the Black-Scholes option-pricing model that uses the following weighted-average assumptions for the year ended December 31, 2015:

During the year ended December 31, 2014, Andrea granted 2,200,000 shares of common stock options with a weighted average fair market fair of $0.08 per share. The grants provide for up to a three-year vesting period, a weighted average exercise price of $0.08 per share, which was the fair market value of the Company’s common stock at the date of grant and a weighted average expected life of 8 years. The fair values of the 2,200,000 stock options granted was $185,000 which was estimated on the date of grant using the Black-Scholes option-pricing model that uses the following weighted-average assumptions for the year ended December 31, 2014:

	December 31,		December 31,
	2015		2014
Expected life in years (based on simplified method)	8 years		8 years
Risk-free interest rates	2.04	%	2.10	%
Volatility (based on historical volatility)	205.3	%	203.0	%
Dividend yield	0	%	0	%

Option activity during 2015 is summarized as follows:

	Options Outstanding							Options Exercisable
							Weighted						Weighted
			Weighted		Weighted		Average		Weighted		Weighted		Average
			Average		Average		Remaining		Average		Average		Remaining
	Options		Exercise		Fair		Contractual	Options	Exercise		Fair		Contractual
	Outstanding		Price		Value		Life	Exercisable	Price		Value		Life
At January 1, 2015	18,534,821		$	0.08	$	0.08	3.92 years	16,317,821	$	0.08	$	0.08	3.13 years
Cancelled/Expired	(1,510,000	)	$	0.05	$	0.05
Exercised	(695,000	)	$	0.05	$	0.05
Granted	600,000		$	0.06	$	0.06
At December 31, 2015	16,929,821		$	0.09	$	0.08	3.56 years	14,895,122	$	0.09	$	0.08	2.85 years

During the year ended December 31, 2015, 782,301 options vested with a weighted average exercise price of $0.09 and a weighted average fair value of $0.09 per option. Based on the December 31, 2015, fair market value of the Company’s common stock of $0.07 per share, the aggregate intrinsic value of the 16,929,821 options outstanding and 14,895,122 shares exercisable is $151,900 and $146,900, respectively. The aggregate intrinsic value of options exercised was $14,250 for the years ended December 31, 2015.

Total compensation expense recognized related to stock option awards was $113,167 and $42,574 for the year ended December 31, 2015 and 2014, respectively. In the accompanying consolidated statement of operations for the year ended December 31, 2014, $91,774 of expense is included in general, administrative and selling expenses and $21,393 is included in research and development expenses. In the accompanying consolidated statement of operations for the year ended December 31, 2014, $36,382 of expense is included in general, administrative and selling expenses and $6,192 is included in research and development expenses.

As of December 31, 2015, there was $79,010 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the 2006 Plan. This unrecognized compensation cost is expected to be recognized over the next 3 years ($56,404 in 2016, $20,660 in 2017 and $1,946 in 2018).