STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2014

Shareholders' Equity and Share-based Payments [Text Block]

STOCKHOLDERS’ EQUITY

Series A Convertible Preferred Stock

In January 1997, the Board of Directors authorized the creation of a class of Series A Convertible Preferred Stock with a par value of $.01. The Series A Convertible Preferred Stock is convertible into an equal number of common shares at the holder’s option, subject to adjustment for anti-dilution. The holders of Series A Convertible Preferred Stock are entitled to receive dividends as and if declared by the Board of Directors. In the event of liquidation or dissolution of the Company, the holders of Series A Convertible Preferred Stock are entitled to receive all accrued dividends, if applicable, plus the liquidation price of $1.00 per share. As of December 31, 2014 and 2013, there were no outstanding shares of Series A Convertible Preferred Stock.

Stock Options and Share Based Compensation

In order to retain and attract qualified personnel necessary for the success of the Company, the Company adopted several Stock Option Plans from 1998 through 2004 (and an amendment to the 2004 plan in 2006 pursuant to which the plan was renamed the “2006 Equity Incentive Plan” and amended to provide for the issuance of other types of equity incentives such as restricted stock grants) (collectively, the “Plans”) covering up to 6,250,000 of the Company’s common shares, pursuant to which officers, directors, key employees and consultants to the Company are eligible to receive incentive stock options and nonqualified stock options. The Compensation Committee of the Board of Directors administers these Plans and determines the terms and conditions of options granted, including the exercise price. These Plans generally provide that all stock options will expire within ten years of the date of grant. Incentive stock options granted under these Plans must be granted at an exercise price that is not less than the fair market value per share at the date of the grant and the exercise price must not be less than 110% of the fair market value per share at the date of the grant for grants to persons owning more than 10% of the voting stock of the Company. These Plans also entitle non-employee directors to receive grants of non-qualified stock options as approved by the Board of Directors.

The Company uses the Black-Scholes option pricing model to value the options. The table below presents the weighted average expected life of the options in years. The expected life computation is based on the time to option expiration. Volatility is determined using changes in historical stock prices. The interest rate for periods within the expected life of the award is based on the U.S. Treasury yield curve in effect at the time of grant.

The fair value of share-based payment units was estimated using the Black-Scholes option pricing model with the following assumptions and weighted average fair values as follows:

	Twelve Months Ended
	December 31,
	2014		2013
Valuation assumptions:
Grant price	$3.09- $5.68		$	3.12
Exercise price	$3.09- $5.68		$	3.12
Expected dividend yield	0	%		0	%
Expected volatility	90%-152.6%			100.41	%
Expected life (in years)	5			5
Risk-free interest rate	0.75% - 1.97%			0.77	%

Stock option activity under the Plans during the periods indicated below is as follows:

	Number of Shares Subject to Issuance		Weighted- average Exercise Price		Weighted- average Remaining Contractual Term		Aggregate Intrinsic Value

Outstanding at December 31, 2012		93,330	$	16.48		1.66 years

Granted		16,875		3.12
Forfeited or expired		(50,119)		15.12
Exercised		(19,150)		3.68
Outstanding at December 31, 2013		40,936	$	18.48		2.42 years	$	12,100

Granted		203,622	$	4.31
Forfeited or expired		(9,080)		9.63
Exercised		-		-
Outstanding at December 31, 2014		235,478	$	5.95		4.44 years	$	-

Exercisable at December 31, 2014		21,544	$	28.70		1.32 years	$	-

There were 203,622 and 16,875 options granted in the years ended December 31, 2014 and 2013.

The following is a summary of stock options as of December 31, 2014:

	Options Outstanding					Options Exercisable
Range of Exercise Prices	Number of Options		Weighted- average Remaining Life	Weighted- average Exercise Price		Number of Options		Weighted- average Exercise Price
$3.09 to $4.00		141,122	4.75 years	$	3.26		3,438	$	3.12
$4.00 to $12.00		80,625	4.49 years	$	4.78		4,375	$	11.60
$12.24 to 24.00		375	0.58 years	$	12.56		375	$	12.56
$29.04 to $45.12		13,356	1.22 years	$	41.34		13,356	$	41.34
		235,478	4.44 years	$	5.95		21,544	$	28.70

The weighted-average fair value of the options granted during the years ended December 31, 2014 and 2013 is $3.63and $3.12, respectively.

As of December 31, 2014, the Company had 76,291 options available for future grant under the existing Stock Option and Equity Incentive Plans.

Restricted Stock Units

The Company issues Restricted Stock Units (“RSUs”) which are equity-based instruments that may be settled in shares of common stock of the Company. In the year ended December 31, 2014, the Company issued RSUs and to certain directors as compensation. RSU agreements vest with the passage of time. The vesting of all RSUs is contingent on continued board services.

The compensation expense incurred by the Company for RSUs is based on the closing market price of the Company’s common stock on the date of grant and is amortized ratably on a straight-line basis over the requisite service period and charged to general and administrative expense with a corresponding increase to additional paid-in capital. During the years ended December 31, 2014 and 2013, charges associated with RSUs were $86,873 and $0, respectively.

	Number of Shares		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value

Outstanding at December 31, 2013		-		-	$	-
Granted		34,351		3.93
Vested and Settled in Shares		(2,544)		3.93
Canceled / Expired		-		3.93		-

Outstanding at December 31, 2014		31,807		3.93	$	-

As of December 31, 2014, there was $48,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements from previously granted RSUs. That cost is expected to be recognized over a weighted-average period of 1 year.

As of December 31, 2014, there was $327,000 of total unrecognized compensation cost, net of estimated forfeitures, related to all unvested stock options and restricted stock units, which is expected to be recognized over a weighted average period of approximately four years.

Share based compensation expense for the years ended December 31, 2014 and 2013 is as follows:

	Years Ended December 31,
Compensation cost recognized:	2014		2013
Stock options	$	101,767	$	19,053
Restricted stock units		86,873		12,600
	$	188,640	$	31,653

Share based compensation is included in operating expenses as follows:

	Years Ended December 31,
	2014		2013
Selling	$	-	$	13,099
General and administrative		184,543		6,467
Research and development		4,097		12,087
	$	188,640	$	31,653

The Company has a net operating loss carry-forward as of December 31, 2014, and no excess tax benefits for the tax deductions related to share based awards were recognized in the statements of operations. Additionally, no incremental tax benefits were recognized from stock options exercised in 2014 that would have resulted in a reclassification to reduce net cash provided by operating activities with an offsetting increase in net cash provided by financing activities.

All stock options have been issued with an exercise price that is equal or above the fair market value of the Company’s Common Stock on the date of grant.

Warrants

All previously granted warrants were issued with an exercise price that was equal to or above the fair market value of the Company’s common stock on the date of grant. As of December 31, 2014, the Company had 64,981 remaining warrants outstanding. No warrants were exercised in 2014 or 2013.