Quarterly report pursuant to Section 13 or 15(d)

Stock options and warrants

v3.3.0.814
Stock options and warrants
9 Months Ended
Sep. 30, 2015
Stock options and warrants [Abstract]  
Stock options and warrants

Note 6. Stock options and warrants:

 

Stock options:

 

The Company currently provides stock-based compensation to employees, directors and consultants, both under the Company's 2002 Stock Incentive Plan, as amended (the "Plan"), and non-qualified options and warrants issued outside of the Plan. At the Annual Shareholders Meeting held on September 1, 2015, the Company's shareholders approved amendments to the Plan to increase the number of shares reserved under the Plan from 3,673,127 to 5,673,127. The Company estimates the fair value of the share-based awards on the date of grant using the Black-Scholes option-pricing model (the "Black-Scholes model").  Using the Black-Scholes model, the value of the award that is ultimately expected to vest is recognized over the requisite service period in the statement of operations.  Option forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.  The Company attributes compensation to expense using the straight-line single option method for all options granted. 

 

The Company's determination of the estimated fair value of share-based payment awards on the date of grant is affected by the following variables and assumptions:

 

The grant date exercise price – the closing market price of the Company's common stock on the date of the grant;

Estimated option term – based on historical experience with existing option holders;

Estimated dividend rates – based on historical and anticipated dividends over the life of the option;

Term of the option – based on historical experience, grants have lives of approximately 3-5 years;

Risk-free interest rates – with maturities that approximate the expected life of the options granted;

Calculated stock price volatility – calculated over the expected life of the options granted, which is calculated based on the daily closing price of the Company's common stock over a period equal to the expected term of the option; and

Option exercise behaviors – based on actual and projected employee stock option exercises and forfeitures.

 

The Company recognized total expenses for stock-based compensation during the three and nine months ended September 30, 2015 and 2014 which are included in the accompanying statements of operations, in the following categories:

 

    Three Months Ended     Nine Months Ended
     2015      2014       2015       2014
                     

Selling, general and administrative expenses

$ 214,848     $ 201,543     $  910,854     $  889,888

Research and development expenses

  23,236       12,531       108,213       53,598
     
                     

    Total stock-based compensation

  $ 238,084     $ 214,074     $  1,019,067     $  943,486

 

Stock incentive plan options:

 

The Company currently provides stock-based compensation to employees, directors and consultants under the Plan. The Company utilized assumptions in the estimation of fair value of stock-based compensation for the nine months ended September 30, as follows:

 

2015

 


 

2014 



         

Dividend yield

  0 %     0 %

Expected price volatility

  93 %     96-126 %

Risk free interest rate

    1.39 %     1.52-1.74 %

Expected term

    5 years     5 years   

 

A summary of stock option activity under the Plan for options to employees, officers, directors and consultants, for the nine months ended September 30, 2015, is presented below:

 

Shares
Underlying
Options

   

Weighted

Average

Exercise

Price

   

Weighted

Average

Remaining

Contractual

Term (Years)

   

Aggregate

Intrinsic

Value

                   

Outstanding at January 1, 2015

1,854,258     $ 5.79              

Granted

1,094,500       1.89              

Exercised

                       

Forfeited

    (217,427 )     3.64              
                             

Outstanding at September 30, 2015

    2,731,331     $ 4.40       8.1     $  
                                 

Exercisable at September 30, 2015

    1,793,897     $ 5.67       7.5     $

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company's closing stock price on September 30, 2015 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders, had all option holders been able to, and in fact had, exercised their options on September 30, 2015.

During the nine months ended September 30, 2015, 344,000 options were issued to non-employee directors under the Plan, with an exercise price of  $1.89 per share. The options expire ten years from the date of grant and vest over one year, based upon 25% on the date of grant, and 25% on each of April 1, 2015, July 1, 2015, and October 1, 2015.

During the nine months ended September 30, 2015, 750,500 options were issued to officers and employees under the Plan, exercisable at an average of $1.89 per share. The options expire ten years from the date of grant and vest over two years with 50% vesting upon six month anniversary of the grant date and the remaining balance vesting over the following six quarters in arrears.


During the three and nine months ended September 30, 2015, no options were exercised.


During the nine months ended September 30, 2015, a total of 217,427 options outstanding under the Plan were forfeited, of which 37,154 were vested and 180,273 were unvested. The vested options were exercisable at an average of $11.36 per share and the unvested options were exercisable at an average of $2.05 per share. During the nine months ended September 30, 2014, a total of 41,561 options outstanding under the Plan were forfeited, of which 36,511 were vested and 5,050 were unvested. The vested options were exercisable at an average of $33.86 per share and the unvested options were exercisable at an average of $2.15 per share.

 

The total fair value of stock options granted to employees, directors and consultants that vested and became exercisable during the nine months ended September 30, 2015 and 2014, was approximately $461,000 and $1,047,000, respectively.   Based upon the Company's experience, approximately 85% of the outstanding nonvested stock options, or approximately 797,000 options, are expected to vest in the future under their terms.

 

A summary of the activity of nonvested options under the Plan to acquire common shares granted to employees, officers, directors and consultants during the nine months ended September 30, 2015 is presented below:

 

Nonvested Shares

Nonvested
Shares
Underlying
Options

   

Weighted

Average

Exercise

Price

   

Weighted

Average

Grant Date

Fair Value

           

Nonvested at January 1, 2015

319,652     $ 2.28     $ 1.85

Granted

1,094,500       1.89       1.34

Vested

    (296,445 )     2.03       1.56

Forfeited

    (180,273 )     2.05       1.48
                       

Nonvested at September 30, 2015

    937,434     $ 1.95     $ 1.42

 

At September 30, 2015, based upon employee, officer, director and consultant options granted under the Plan to that point, there was approximately $394,000 of additional unrecognized compensation cost related to stock options that will be recorded over a weighted average future period of approximately one year.

 

Other common stock purchase options and warrants:

 

As of September 30, 2015, in addition to the stock incentive plan options discussed above, the Company had outstanding 3,455,935 non-qualified options and warrants in connection with offering warrants and a former officers' employment that were not issued under the Plan.

 

During the nine month periods ended September 30, 2015 and 2014, no stock options were granted outside of the Plan.

 

Operating expenses for the nine months ended September 30, 2015 and 2014 did not include any value related to stock-based compensation of non-qualified options and warrants.

 

Following is a summary of outstanding options and warrants that were issued outside of the Plan for the nine months ended September 30, 2015:

 

Shares
Underlying
Options / 
Warrants

   

Weighted

Average

Exercise

Price

 

Weighted
Average
Remaining
Contractual
Term (Years)

   

Aggregate

Intrinsic

Value

                   

Outstanding at January 1, 2015

3,455,935     $ 1.93          

Granted

               

Exercised

                   

Forfeited

                   
                         

Outstanding and exercisable at September 30, 2015

    3,455,935     $ 1.93   2.5   $

 

During the nine months ended September 30, 2015 no options or warrants issued outside the plan were exercised. For the nine months ended September 30, 2014, warrants from the May 2013 public offering were exercised to purchase 1,161,570 shares at $1.36 per share of common stock resulting in total proceeds of approximately $1,580,000.

 

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company's closing stock price on September 30, 2015 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders, had all option holders been able to, and in fact had, exercised their options on September 30, 2015.

 

The total fair value of non-qualified stock options previously granted that vested and became exercisable during the nine months ended September 30, 2015 and 2014, was zero. At September 30, 2015, there was no unrecognized cost for non-qualified options that will be recorded in the future.