STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2015

Notes to Financial Statements

STOCK-BASED COMPENSATION

14.  STOCK-BASED COMPENSATION

Stock Options 

As of December 31, 2015, the Company had one active stock-based compensation plan: the 1999 Stock Option Plan (the “1999 Plan”).

1999 Plan

The 1999 Plan was adopted by the Company’s Board of Directors on December 17, 1999. Under the terms of the 1999 Plan, the Company could, originally, issue up to 350,000 non-qualified or incentive stock options to purchase Common Stock of the Company. During the year ended December 31, 2014, the Company subsequently amended and restated the 1999 Plan whereby it increased the share reserve for issuance to approximately 7.0 million shares of the Company’s Common Stock.  The 1999 Plan prohibits the grant of stock option or stock appreciation right awards with an exercise price less than fair market value of Common Stock on the date of grant. The 1999 Plan also generally prohibits the “re-pricing” of stock options or stock appreciation rights, although awards may be bought-out for a payment in cash or the Company’s stock. The 1999 Plan permits the grant of stock based awards other than stock options, including the grant of “full value” awards such as restricted stock, stock units and performance shares. The 1999 Plan permits the qualification of awards under the plan (payable in either stock or cash) as “performance-based compensation” within the meaning of Section 162(m) of the Internal Revenue Code. The number of options issued and outstanding and the number of options remaining available for future issuance are shown in the table below. On July 1, 2014, the Company began soliciting written consents from its shareholders to approve an amendment to the Company’s 1999 Stock Option Plan to increase the number of shares authorized for issuance thereunder from approximately 4.0 million to approximately 7.0 million (the “Amendment”).  As of July 21, 2014, the Company had received written consents approving the Amendment from over 50% of the Company’s stockholders. As such, the Amendment was approved.

A summary of the activity under the Company’s stock option plans is as follows:

	Options			Weighted-  Average  Exercise  Price		Weighted- Average Remaining Contractual Term (Years)
Balance at December 31, 2012		3,031,221		$	0.82		7.9
Granted		817,500		$	1.39		—
Expired/Cancelled		(30,000	)	$	0.74		—
Exercised		(35,310	)	$	0.31		—
Balance at December 31, 2013		3,783,411		$	0.94		7.4
Granted		435,000		$	2.13		—
Expired/Cancelled		(62,498	)	$	1.96		—
Exercised		(98,617	)	$	0.68		—
Balance at December 31, 2014		4,057,296		$	1.06		6.8
Granted		2,110,000		$	1.63		—
Expired/Cancelled		(750,622	)	$	1.86		—
Exercised		(39,705	)	$	0.87		—
Balance at December 31, 2015		5,376,969		$	1.17		6.9

At December 31, 2015, a total of 5,376,969 options were outstanding of which 3,442,579 were exercisable at a weighted average price of $0.91 per share with a remaining weighted average contractual term of approximately 5.5 years.  The Company expects that, in addition to the 3,442,579 options that were exercisable as of December 31, 2015, another 1,875,979 will ultimately vest resulting in a combined total of 5,318,558.  Those 5,318,558 shares have a weighted average exercise price of $1.17, an aggregate intrinsic value of approximately $1,647,923 and a weighted average remaining contractual life of 6.9 years as of December 31, 2015.

During the year ended December 31, 2015, there were 39,705 options exercised for cash resulting in the issuance of 39,705 shares of the Company’s Common Stock and proceeds of approximately $34,000.  During the year ended December 31, 2014, there were 98,617 options exercised which resulted in proceeds of approximately $67,000 to the Company.

The intrinsic value of options exercised during the years ended December 31, 2015 and 2014 was approximately $35,100 and $170,000, respectively. The intrinsic value of options exercisable at December 31, 2015 and 2014 was approximately $1,575,000 and $4,696,000, respectively.  The aggregate intrinsic value for all options outstanding as of December 31, 2015 and 2014 was approximately $1,652,148 and $5,427,000, respectively.

The following table summarizes information about employee stock options outstanding and exercisable at December 31, 2015:

		Options Outstanding						Options Exercisable
Exercise Price				Weighted-
				Average		Weighted-				Weighted-
		Number		Remaining Life		Average		Number		Average
		Outstanding		(Years)		Exercise Price		Exercisable		Exercise Price
$	0.17–0.24		420,221		3.0	$	0.19		420,221	$	0.19
$	0.54-0.74		735,500		4.6	$	0.72		735,500	$	0.72
$	0.77-1.15		2,346,248		6.6	$	0.98		1,974,191	$	0.95
$	1.45-2.74		1,875,000		9.1	$	1.82		312,667	$	2.02
Total			5,376,969						3,442,579

During the year ended December 31, 2015, the Company issued an aggregate of 425,000 stock options to purchase shares of the Company’s common stock to certain members of the Company’s management team.  Such options contain certain performance conditions affecting the vesting of these options.  The Company evaluated the options using the guidance in ASC No. 718, Compensation – Stock Compensation, which requires accruals of compensation cost for awards with performance conditions based on the probable outcome of the performance condition.  The Company has not accrued any compensation cost for these options based on its assessment of the achievement of the performance conditions and such options expired on December 31, 2015.

In September 2015, the Company issued an aggregate of 144,000 options to purchase shares of the Company’s stock to certain members of the Company’s Board of Directors in return for their service from January 1, 2016 through December 31, 2016.  Such options will vest at the rate of 12,000 options per month on the last day of each month during the 2016 year.  The options have an exercise price of $1.73 per share and a term of 10 years. The Company will begin recognition of compensation based on the grant-date fair value ratably over the 2016 requisite service period.

In the fourth quarter of 2015, the Company issued 210,000 options to certain employees of the Company.  As of December 31, 2015 such options were subject to approval by the Company's Board of Directors.  In February 2016, the Company's Board of Directors approved the aforementioned option issuance. 

Restricted Stock Awards

In December 2014, the Company issued 94,116 shares of its Common Stock to certain members of the Company’s Board of Directors as compensation for services to be rendered through December 2015.  Such shares are forfeitable should the Board members’ services be terminated. For the year ended December 31, 2015, no such shares were forfeited and the Company recorded approximately $216,000 as compensation expense.

Stock-based Compensation

Stock-based compensation related to equity options and restricted stock has been classified as follows in the accompanying consolidated statements of operations (in thousands):

	Year Ended December 31,
	2015		2014		2013
Cost of revenues	$	15	$	12	$	12
General and administrative		618		572		351
Sales and marketing		171		142		132
Research and development		156		130		121
Total	$	960	$	856	$	616

Common Stock Reserved for Future Issuance

The following table summarizes the Common Stock reserved for future issuance as of December 31, 2015:

	Common Stock
Convertible preferred stock – Series B and Series E		6,488,134
Convertible lines of credit		1,670,735
Stock options outstanding		5,376,969
Warrants outstanding		450,000
Restricted stock grants		-
Authorized for future grant under stock option plans		1,198,438
		15,184,276