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10. Stock Options and Warrants | 12 Months Ended
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Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract] |
10. Stock Options and Warrants | The Company periodically issues stock options and warrants to employees and non-employees in capital raising transactions, for services and for financing costs. Options and warrants vest and expire according to terms established at the grant date. Options The Company currently issues stock options to employees, directors and consultants under its 2004 Stock Option Plan (the Plan). The Company could issue options under the Plan to acquire up to 7,000,000 shares of common stock as amended in May 2006. From the Plan’s inception in 2004 up to December 31, 2014, the Company granted options to purchase 9,943,937 shares under the Plan, of which 4,383,574 shares were subsequently cancelled or forfeited and made available for grants under the Plan. In years ending December 31, 2014, 2013 and 2012, the Company granted options to purchase shares under the plan to employees and directors totaling 852,122 shares, 207,819 shares and 858,000 shares, respectively, and prior grants were cancelled or forfeited totaling 871,127 shares, 21,009 shares and 90,000 shares, respectively. As of December 31, 2014, options to purchase 4,292,030 shares granted under the Plan remain outstanding and 1,439,637 shares were available to be granted under the Plan. From the Company’s inception in February 1998 up to December 31, 2014, options to purchase a total of 37,050,000 shares were granted outside of the Plan, of which, 2,860,000 shares were exercised and 17,430,000 shares were subsequently cancelled or forfeited. During the year ended December 31, 2012, 4,000,000 shares were granted outside the Plan. There were no such grants or forfeitures outside of the Plan in 2014 and 2013. During the year ended December 31, 2013, prior grants outside of the plan were forfeited totaling 7,040,000 shares. No such prior grants outside of the plan were forfeited or canceled in 2012 and 2014. As of December 31, 2014, options granted outside of the Plan to purchase 16,760,000 shares remain outstanding. Employee options vest according to the terms of the specific grant and expire from 5 to 10 years from date of grant. Non-employee option grants vest upon issuance up to 2 years. The weighted-average, remaining contractual life of employee and Non-employee options outstanding at December 31, 2014 was 7.1 years. Stock option activity for the period January 1, 2012 to December 31, 2014, was as follows:
|  | Weighted Avg. Options |  |  | Weighted Avg. Exercise Price |
Options, December 31, 2011 |  |  | 24,067,892 |  |  | $ | 0.30 |
Options granted |  |  | 4,858,000 |  |  |  | 0.30 |
Options exercised |  |  | (776,667 | ) |  |  | 0.47 |
Options forfeited |  |  | (871,127 | ) |  |  | 0.98 |
Options, December 31, 2012 |  |  | 27,278,098 |  |  | $ | 0.27 |
Options granted |  |  | 207,819 |  |  |  | 1.17 |
Options exercised |  |  | (115,000 | ) |  |  | 0.60 |
Options forfeited |  |  | (7,061,009 | ) |  |  | 0.25 |
Options, December 31, 2013 |  |  | 20,309,908 |  |  | $ | 0.28 |
Options granted |  |  | 852,122 |  |  |  | 0.80 |
Options exercised |  |  | (20,000 | ) |  |  | 0.30 |
Options forfeited |  |  | (90,000 | ) |  |  | 0.91 |
Options, December 31, 2014 |  |  | 21,052,030 |  |  | $ | 0.30 |
The weighted average exercise prices, remaining contractual lives for options granted, exercisable, and expected to vest under the Plan as of December 31, 2014 were as follows:
|  | Outstanding Options |  | Exercisable Options
Option Exercise Price Per Share |  | Shares |  |  | Life (Years) |  | Weighted Average Exercise Price |  | Shares |  |  | Weighted Average Exercise Price
$ 0.21 - $ 0.99 |  |  | 20,788,801 |  |  | 6.1 |  | $0.29 |  |  | 18,229,381 |  |  | $0.28
$ 1.00 - $ 1.99 |  |  | 263,229 |  |  | 5.2 |  | $1.22 |  |  | 263,229 |  |  | $1.28
|  |  | 21,052,030 |  |  |  |  | $0.30 |  |  | 18,492,610 |  |  | $0.29
As of December 31, 2014 the market price of the Company’s stock was $0.47 per share. At December 31, 2014 the aggregate intrinsic value of the options outstanding was $4,107,750. Future unamortized compensation expense on the unvested outstanding options at December 31, 2014 is approximately $474,000. 2014
| · | In February 2014, options to purchase 20,000 shares of common stock were exercised resulting in proceeds of $6,000.
| · | From January up to October 2014, the Company issued options to purchase a total of 852,122 shares of common stock to employee, officers and members of the Board of Directors with an estimated fair value of approximately $454,499 using the Black-Scholes Option Pricing model. The options are exercisable from $0.65 up to $0.99 per share, vesting within two years and expire in two and ten years from the date of grant. During the year ended December 31, 2014, the Company recognized compensation costs of $295,884 based on the fair value of options that vested.
| · | During year ended December 31, 2014, the Company amortized $376,247 of compensation cost based on the vesting of the options granted to employees, directors and consultants in prior years.
2013
| · | From April up to September 2013, options to purchase 115,000 shares of common stock were exercised resulting in net proceeds of $19,500. Included in the exercise was issuance of 50,000 shares of common stock valued at $49,000 pursuant to an exercise of options and accounted for as partial settlement of a liability recorded in prior years.
| · | From July up to September 2013, the Company issued options to purchase 207,819 shares of common stock to consultants, employees, officers and members of the Board of Directors with a fair value of approximately $201,000 using the Black-Scholes Option Pricing model. The options are exercisable at $1.09/share up to $1.71/share, vest over a period of one year and expire in two years and ten years from the date of grant. During the year ended December 31, 2013, the Company recognized compensation costs of $101,157 based on the fair value of options that vested.
| · | In November 2013, pursuant to separation agreement with an Officer of the Company, the Company cancelled unvested option to purchase 7,040,000 shares of common stock at $0.25 and modified the vesting period of unvested option to purchase 3,520,000 shares of common stock at $0.25, both granted 2011 (see Note 14).
| · | During year ended December 31, 2013, the Company amortized $403,127 of compensation cost based on the vesting of the options granted to employees, directors and consultants in prior years.
2012
| · | From November up to December 2012, options to purchase 776,667 shares of common stock were exercised resulting in net proceeds of $364,700.
| · | From February 2012 up to October 2012, the Company issued 4,858,000 options to employees and an officer of the Company, valued at $1,456,007 using Black-Scholes Option Pricing model. The options have an exercise price of $0.25 to $0.83 per share, vest over a period of up to four years, and expire ten years from date of grant. During the year ended December 31, 2012, the Company recognized compensation costs of $538,037 based upon its vesting.
| · | During year ended December 31, 2012, the Company amortized $1,366,846 of compensation cost based on the vesting of the options granted to employees, directors and consultants in prior years
Black-Scholes Option Pricing During the years ended December 31, 2014, 2013 and 2012, the Company used the following average assumptions in its calculation using the Black-Scholes Option Pricing model:
|  | 2014 |  |  | 2013 |  |  | 2012 |
Expected life (years) |  |  | 1.5 – 5.5 |  |  |  | 1.5 – 5.5 |  |  |  | 5.0 – 7.0 |
Risk free interest rate |  |  | 0.12 – 1.70% |  |  |  | 0.34 – 1.65% |  |  |  | 0.62 – 1.27% |
Volatility |  |  | 123 – 135% |  |  |  | 127 – 130% |  |  |  | 125 – 140% |
Expected dividend yield |  |  | 0% |  |  |  | 0% |  |  |  | 0% |
The expected life warrants are based on the expiration date of the related options. The risk-free interest rate is based on the yield available on U.S. Treasury securities. The Company estimates volatility based on the historical volatility of its common stock. The expected dividend yield was based on the fact that the Company has not paid dividends to stockholders in the past nor is it expected to pay any dividends in the foreseeable future. The weighted average fair value for options granted in 2013, 2012 and 2011 were $0.96, $0.30 and $0.37, respectively. Warrants The following table summarizes certain information about the Company’s stock purchase warrants.
|  | Warrants |  |  | Weighted Avg. Exercise Price |
Warrants outstanding, December 31, 2011 |  |  | 49,106,280 |  |  | $ | 0.32 |
Warrants granted |  |  | 9,273,316 |  |  |  | 0.31 |
Warrants exercised |  |  | (12,039,846 | ) |  |  | 0.29 |
Warrants cancelled |  |  | (4,134,243 | ) |  |  | 0.49 |
Warrants outstanding, December 31, 2012 |  |  | 42,205,507 |  |  | $ | 0.31 |
Warrants granted |  |  | 150,000 |  |  |  | 0.30 |
Warrants exercised |  |  | (29,037,389 | ) |  |  | 0.29 |
Warrants cancelled |  |  | (1,554,152 | ) |  |  | 0.33 |
Warrants outstanding, December 31, 2013 |  |  | 11,763,966 |  |  | $ | 0.34 |
Warrants granted |  |  | 761,037 |  |  |  | 0.71 |
Warrants exercised |  |  | (4,690,947 | ) |  |  | 0.30 |
Warrants cancelled |  |  | (2,141,969 | ) |  |  | 0.46 |
Warrants outstanding, December 31, 2014 |  |  | 5,692,087 |  |  | $ | 0.38 |
At December 31, 2014 the price of the Company’s common stock was $0.47 per share and the aggregate intrinsic value of the warrants outstanding was $715,174. Future unamortized compensation expense on the unvested outstanding warrants at December 31, 2014 is approximately $66,000.
|  | Outstanding Warrants |  |  |  | Exercisable Warrants
Warrant Exercise Price Per Share |  | Shares |  |  | Life (Years) |  | Weighted Average Exercise Price |  | Shares |  |  | Weighted Average Exercise Price
$ 0.25 - $ 0.99 |  |  | 5,572,087 |  |  | 3.0 |  | $0.36 |  |  | 5,177,087 |  |  | $0.34
$ 1.00 - $ 1.99 |  |  | 120,000 |  |  | 1.0 |  | $1.01 |  |  | 120,000 |  |  | $1.01
|  |  | 5,692,087 |  |  |  |  | $0.38 |  |  | 5,297,087 |  |  | $0.35
2014
| · | In January and February 2014, warrants to acquire 4,690,947 shares of common stock were exercised resulting in gross proceeds of $1,407,284. Furthermore, included in the exercise was issuance of 100,000 shares of common stock valued at $30,000 pursuant to an exercise of warrants and accounted for as partial settlement of unpaid fees recorded in prior years. As a result, the aggregate net proceeds received amounted to $1,377,284.
| · | From January up to October 2014, the Company granted consultants warrants to purchase a total of 315,000 shares with an average exercise price of $0.84 per share, vesting in six months up to two years and expiring in two years up to ten years from the date of grant. The fair value of the warrants upon vesting amounted to $20,950 using the Black-Scholes Option Pricing model with the following average assumptions: risk-free interest rate of 0.89%; dividend yield of 0%; volatility of 66%; and an expected life of twenty nine months. During the year ended December 31, 2014, the Company recognized an amortized expense of $20,950 based on the fair value of options that vested.
| · | In May 2014, the Company granted a consultant warrants to purchase 300,000 shares over eighteen months at the rate of 50,000 shares every three months, with an exercise price of equal to the closing stock price on the date of vesting, and expiring two years from the date of grant. The fair value of the warrants vested at December 31, 2014 amounted to $21,000 using the Black-Scholes Option Pricing model with the following average assumptions: risk-free interest rate of 0.50%; dividend yield of 0%; volatility of 65%; and an expected life of 18 months. During the year ended December 31, 2014, the Company recognized an amortized expense of $21,000 based on the fair value of options that vested.
| · | In October through December 2014, pursuant to terms of convertible notes issued, the Company granted warrants to purchase 146,037 shares with an exercise price of $0.48 per share, vesting immediately upon grant and expiring one year from the date of grant. See Note 5 for further discussion.
| · | During year ended December 31, 2014, the Company amortized $16,645 of compensation cost based on the vesting of the warrants granted to employees, directors and consultants in prior years.
2013
| · | In March 2013, pursuant to a settlement of debt agreement, the Company granted a consultant a warrant to purchase 150,000 shares of its common stock with an exercise price of $0.30 per share, vesting immediately and expiring in two years from grant date. The fair value of the warrant amounted to $129,622 using the Black-Scholes Option Pricing model with the following average assumptions: risk-free interest rate of 0.26%; dividend yield of 0%; volatility of 132%; and an expected life of two years.
| · | During the year ended December 31, 2013, warrants to acquire 29,037,389 shares of common stock were exercised resulting in proceeds of $8,408,718, net of direct costs incurred of $78,521.
| · | During year ended December 31, 2013, the Company recorded $52,314 of compensation cost based on the vesting of the warrants granted to employees, directors and consultants in prior years.
2012
| · | During the year ended December 31, 2012, the Company granted warrants to consultants to purchase 1,850,000 shares of its common stock. The warrants have an exercise price of $0.30 per share, fully vested and will expire in two to three years from grant date. Total fair value of the warrant amounted to $517,777 using the Black-Scholes Option Pricing model with the following average assumptions: risk-free interest rate of 0.23% to 0.39%; dividend yield of 0%; volatility of 111%; and an expected life of three years.
| · | During the year ended December 31, 2012, the Company granted 7,423,316 warrants to acquire share of its common stock in connection of its issuance of convertible notes. The warrants have an average exercise price of $0.29 per share, fully vested, and will expire in two to three years from date of grant. See Note 5 for further discussion.
| · | During the year ended December 31, 2012, the Company recognized amortization expense of $289,513 based upon its vesting of warrants granted in prior years.

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- 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 Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 + Details
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