XML 60 R17.htm IDEA: XBRL DOCUMENT

Stock-Based Compensation

12 Months Ended

Dec. 31, 2013

10. Stock-Based Compensation

We have several approved stock option plans for which stock options and restricted stock awards are available to grant to employees, consultants and directors. All employee and director stock options granted under our stock option plans have an exercise price equal to the market value of the underlying common stock on the grant date. There are no vesting provisions tied to performance conditions for any options, as vesting for all outstanding option grants was based only on continued service as an employee, consultant or director. All of our outstanding stock options and restricted stock awards are classified as equity instruments.

Stock Options

As of December 31, 2013, we had two equity incentive plans:

	·	The 1998 Non-Officer Stock Option Plan (the “1998 Plan”), which expired in June 2008; and
	·	The 2006 Equity Incentive Plan (the “2006 Plan”).

We also had one non-employee director stock option plan as of December 31, 2013:

The 2001 Non-Employee Director Stock Option Plan (the “Director Plan”), which expired in March 2011.

The following table summarizes information with respect to all options to purchase shares of common stock outstanding under the 1996 Plan, the 1998 Plan, the 2006 Plan and the Director Plan at December 31, 2013:

Options Outstanding				Options Exercisable
Range of Exercise Price	Number Outstanding at 12/31/13		Weighted Average Remaining Contractual Life (years)	Weighted Average Exercise Price		Number Exercisable at 12/31/13	Weighted Average Exercise Price

$ $4.02 - $ 4.25		1,241,000	5.3	$	4.24	1,097,694	$	4.25
$ 4.26 - $ 7.70		348,583	6.1	$	5.43	114,526	$	5.25
$ 7.71 - $ 122.50		11,000	0.7	$	108.45	11,000	$	108.45
		1,600,583	5.4	$	5.22	1,223,220	$	5.28

A summary of the combined activity under all of the stock option plans is set forth below:

	Weighted Average Number of Shares			Exercise Price Per Share		Weighted-Average Exercise Price
Outstanding at January 1, 2011		19,804		$	35.39 – 687.50	$	101.36

Granted		—		$	—	$	—

Cancelled or expired		(480	)	$	135.00 – 687.50	$	523.23
Exercised		—		$	—	$	—
Outstanding at December 31, 2011		19,324		$	35.39 – 368.75	$	92.19

Granted		1,704,000		$	4.02 – 6.28	$	4.35
Cancelled or expired		(8,124	)	$	35.39 – 368.75	$	69.36
Exercised		—		$	—	$	—
Outstanding, vested and expected to vest at December 31, 2012		1,715,200		$	4.02 – 125.00	$	5.04

Granted		145,000		$	5.54 - 7.70	$	6.06
Cancelled or expired		(18,256	)	$	4.25- 125.00	$	5.57
Exercised		(241,361	)	$	4.25 – 6.28	$	4.39
Outstanding, vested and expected to vest at December 31, 2013		1,600,583		$	4.02 – 122.50	$	5.22

The assumptions used to value stock options granted to directors, employees and consultants during the year ended December 31, 2013 and 2012 are as follows:

	For the year
	ended December 31, 2013

Annual dividend yield		-
Expected life (years)		4.3
Risk-free interest rate		0.65% - 2.15	%
Expected volatility		117% - 154	%

	For the year
	ended December 31, 2012

Annual dividend yield		-
Expected life (years)		3.8 – 4.3
Risk-free interest rate		0.43% - 0.62	%
Expected volatility		169% - 187	%

The aggregate intrinsic value of the 1,600,583 stock options that are outstanding, vested and expected to vest at December 31, 2013 is $2,906,724.

During the years ended December 31, 2013, 2012 and 2011, the Company recorded $2.5 million, $3.4 million and $87,000, respectively, of compensation expense related to the vesting of stock options. The fair value of the stock-based compensation was calculated using the Black-Scholes option pricing model as of the grant date of the stock option.

The 1996 Plan terminated effective January 17, 2006, and the 1998 Plan terminated effective June 15, 2008. Although we can no longer issue stock options out of the plans, the outstanding options at the date of termination will remain outstanding and vest in accordance with their terms. Options granted under the Director Plan vest over a one to four-year period, expire five to seven years after the date of grant and have exercise prices reflecting market value of the shares of our common stock on the date of grant. Stock options granted under the 1996, 1998 and 2006 Plans are exercisable over a maximum term of ten years from the date of grant, vest in various installments over a one to four-year period and have exercise prices reflecting the market value of the shares of common stock on the date of grant.

During the year ended December 31, 2013, the Company received an aggregate of $1.1 million from five employees in connection with the exercise of stock options into 241,361 shares of common stock. The aggregate intrinsic value of the options exercised was $502,000 on the dates of exercise.

We granted options to purchase 145,000 shares of our common stock to three employees during the year ended December 31, 2013 with an aggregate grant date fair value of approximately $748,000 computed using the Black-Scholes option pricing model. The options have a 7-year life and 1/3 of the options are vested on the one year anniversary date of grant with the remaining to vest monthly over the remaining 24-months.

During the year ended December 31, 2012, we granted 1,175,000 options to purchase shares of our common stock to employees and 360,000 options to purchase shares of our common stock to members of our Board. During the year ended December 31, 2012, we granted 169,000 options to purchase shares of our common stock to a consultant.

We did not grant any options to purchase shares of our common stock to employees, consultants or members of our Board during the year ended December 31, 2011.

Warrants

During the years ended December 31, 2013 and 2012, certain warrant holders exercised their warrants under the cash and cashless exercise provisions, as defined in the agreements. See Note 9 for details of such exercises and number of common stock shares issued.

On December 3, 2010, we issued 120,000 warrants at an exercise price of $1.63 per share to an employee. The fair value of the warrants was $198,000 on the date of grant, using the Black-Scholes option pricing model, which has been amortized to expense over 24 months. During the years ended December 31, 2012 and 2011, we recorded $91,000, and $99,000, respectively, of stock based compensation expense related to vesting of such warrants.

We issued 80,000 five-year stock purchase warrants at an exercise price of $2.50 per share to our legal advisor during the year ended December 31, 2011. We also issued 20,000 three-year stock purchase warrants at an exercise price of $2.00 per share to one of our U.S. based employees during the year ended December 31, 2011. In addition, we issued 20,000 three-year stock purchase warrants at an exercise price or $4.05 per share to an engineering consultant during the year ended December 31, 2011. These warrants to purchase an aggregate of 120,000 shares of our common stock vested on the date of grant. The vested warrant granted to our legal advisor had a fair value on the date of grant of $193,000 and is included in general and administrative expense for the year ended December 31, 2011. The vested warrant granted to our employee had a fair value on the date of grant of $37,000 and is included in research and development expense for the year ended December 31, 2011. The vested warrant granted to our engineering consultant had a fair value on the date of grant of $73,000 and is included in research and development expense for the year ended December 31, 2011.

We issued 20,000 three-year stock purchase warrants at an exercise price of $3.90 per share with a vesting period over 24 months to an employee during the year ended December 31, 2011. The unvested warrant granted to an employee had a fair value on the date of grant of $75,000. This amount was expensed over the vesting period and $26,000, $38,000 and $11,000 of expense related to this warrant is included in research and development expense for the year ended December 31, 2013, 2012 and 2011, respectively. The fair value of stock-based compensation related to the issuance of warrants is calculated using the Black-Scholes option pricing model as of the grant date of the underlying warrant.

On April 4, 2013, we extended a 40,000 stock purchase warrant with an exercise price of $1.00 per share that expired on January 28, 2013 that was issued to an investor in a previous convertible debt financing. The fair value of the warrant was $166,000 on the date of grant, using the Black-Scholes option pricing model, which has been expensed during the year ended December 31, 2013. The warrant holder exercised the warrant on April 4, 2013 and the Company received cash proceeds of $40,000 (see Note 9).

The stock-based compensation expense for the years ended December 31, 2013, 2012 and 2011 reflects the fair value of the vested portion of options and warrants granted to directors, employees and non-employees.

	Years ended December 31,
	2013		2012		2011
Research and development	$	267	$	315	$	11
Sales and marketing		909		1,407		99
General and administrative		1,480		1,777		440
Stock compensation expense	$	2,656	$	3,499	$	550

		Remaining unamortized expense at December 31, 2013
Stock-based compensation		$	1,751

The remaining unamortized expense related to stock options and warrants will be recognized on a straight-line basis monthly as compensation expense over the remaining vesting period which approximates 2.9 years.

A summary of all warrant activity is set forth below:

Outstanding and exercisable	Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life
January 1, 2012		5,405,606		$	1.57		2.45
Issued		-			-		-
Expired/forfeited		(232	)	$	31.75		-
Exercised		(700,738	)	$	1.18		-
December 31, 2012		4,704,636		$	1.61		1.41
Issued		-			-		-
Expired/forfeited		-			-		-
Exercised		(3,876,063	)	$	1.45		-
Outstanding and exercisable, December 31, 2013		828,573		$	2.39		2.06

During the year ended December 31, 2011, the Company issued 422,830 new five-year common stock purchase warrants, with an exercise price of 3.13 per share (see Note 6).

The fair value of stock-based awards is calculated using the Black-Scholes option pricing model, even though this model was developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which differ significantly from our stock options. The Black-Scholes model also requires subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values. The expected term and forfeiture rate of options granted is derived from historical data on employee exercises and post-vesting employment termination behavior, as well as expected behavior on outstanding options and warrants. The risk-free rate is based on the U.S. Treasury rates in effect during the corresponding period of grant. The expected volatility is based on the historical volatility of our stock price. These factors could change in the future, which would affect fair values of stock options granted in such future periods, and could cause volatility in the total amount of the stock-based compensation expense reported in future periods.

Below is a summary of Outstanding Warrants to Purchase

Common Stock as of December 31, 2013:

Description	Issue Date	Exercise Price		Shares	Expiration Date

August 2009 Employee Warrants	8/25/2009	$	0.50	80,000		8/25/2016
2007 Debt Extension Warrants	9/22/2010	$	1.00	16,000		9/22/2015
December 2010 Employee Warrants	12/3/2010	$	1.63	200,000		12/3/2015
January 2011 Employee Warrant	1/21/2011	$	2.00	7,000		1/21/2014
February 2011 Legal Advisor Warrant	2/22/2011	$	2.50	80,000		2/22/2016
March 2011 Investor Warrants	3/9/2011	$	3.13	371,473		3/9/2016
March 2011 Investor Warrants	4/7/2011	$	3.13	34,100		4/7/2016
May 2011 Consultant Warrant	5/17/2011	$	4.05	20,000		5/17/2014
September 2011 Employee Warrant	9/12/2011	$	3.90	20,000		9/12/2014
Total Warrants Outstanding				828,573

- 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+ Details