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Stockholders' Equity
 9 Months Ended
Sep. 30, 2016
Stockholders' Equity [Abstract]  
STOCKHOLDERS' EQUITY
12. STOCKHOLDERS’ EQUITY

 

On October 28, 2015, we filed a registration statement on Form S-3 with the SEC for the potential issuance of up to $10,000,000 in equity (subject to certain limitations). This registration statement became effective on November 10, 2015. Under this form of registration statement, we were limited to raising gross proceeds of no more than one-third of the market capitalization of our common stock (as determined by the high price within the preceding 60 days leading up to a sale of securities) held by non-affiliates (non-insiders) of the Company within a twelve-month period. This limit was approximately $5,958,000, based on the closing price of $8.08 per share as of January 6, 2016. On February 3, 2016, we sold 1,123,810 shares of common stock at a price to the public of $5.25 per share in an underwritten public offering, raising gross proceeds of approximately $5,900,000, resulting in net proceeds of approximately $5,313,000 (after deducting underwriting discounts and offering expenses) to the Company.

 

At the June 15, 2016 Annual Meeting of Stockholders, our stockholders voted to approve an amendment to the Company’s Certificate of Incorporation to increase the number of shares of common stock authorized for issuance from 8,000,000 to 10,000,000.

 

In June 2000, our stockholders approved the 2000 Stock Option and Incentive Plan (the “2000 Plan”) pursuant to the provisions of the Internal Revenue Code of 1986, under which employees and certain service providers may be granted options to purchase shares of the Company’s common stock at i) no less than fair market value on the date of grant in the case of incentive stock options and ii) no less than 85% of fair market value on the date of grant in the case of non-qualified stock options. Vesting requirements are determined by the Compensation and Stock Option Committee of the Board of Directors on a case by case basis. Originally, 250,000 shares of common stock were reserved for issuance under the 2000 Plan. The stockholders of the Company approved an increase in this number to 500,000 shares in June 2001. All options granted under the 2000 Plan expire no later than ten years from the date of grant. The 2000 Plan expired in February 2010, after which date no further options could be granted under the 2000 Plan. However, outstanding options under the 2000 Plan may be exercised in accordance with their terms.

 

In June 2010, our stockholders approved the 2010 Stock Option and Incentive Plan (the “2010 Plan”) pursuant to the provisions of the Internal Revenue Code of 1986, under which employees and certain service providers may be granted options to purchase shares of the Company’s common stock at i) no less than fair market value on the date of grant in the case of incentive stock options and ii) no less than 85% of fair market value on the date of grant in the case of non-qualified stock options. At that time, 300,000 shares of common stock were reserved for issuance under the 2010 Plan and subsequently no additional shares have been reserved for the 2010 Plan. Vesting requirements are determined by the Compensation and Stock Option Committee of the Board of Directors on a case by case basis. All options granted under the 2010 Plan expire no later than ten years from the date of grant.

 

Activity under the stock option plans described above was as follows:

 

    2000 Plan     2010 Plan     Weighted 
Average 
Exercise		     Aggregate Intrinsic Value  
Outstanding at December 31, 2014     157,500       95,500     $ 3.42     $ 364,000  
Grants     0       16,000     $ 7.40          
Terminations     0       (3,000 )   $ 4.95          
Exercises     (26,000 )     (2,000 )   $ 4.29          
Grants     0       44,000     $ 6.98          
Terminations     0       (5,000 )   $ 6.19          
Exercises     0       (16,000 )   $ 5.59          
Outstanding at September 30, 2016     131,500       129,500     $ 3.97     $ 981,000  
Exercisable at September 30, 2016     131,500       25,500     $ 2.62     $ 802,000  
Reserved for future grants     0       150,500                  

   

During the nine-month period ended September 30, 2016, one employee and one director exercised stock options covering the aggregate of 16,000 shares, of which 15,000 were exercised during the three-month period ended September 30, 2016. Six thousand of these options were exercised for cash, resulting in total proceeds of $31,900, and 10,000 of these options were exercised by the surrender of 7,334 shares of common stock with a fair market value of $57,425 at the time of exercise and $75 in cash. During the year ended December 31, 2015, eleven employees exercised stock options covering the aggregate of 28,000 shares, of which 14,000 were exercised during the three-month period ended September 30, 2015. These options were exercised for cash, resulting in total proceeds of $120,210. At September 30, 2016, 261,000 shares of common stock were reserved for future issuance under all outstanding stock options described above, and an additional 150,500 shares of common stock were reserved for the potential issuance of stock option grants in the future under the 2010 Plan. The weighted average remaining life of the options outstanding under the 2000 Plan and the 2010 Plan as of September 30, 2016 was approximately four years and seven months. The weighted average remaining life of the options exercisable under these plans as of September 30, 2016 was approximately two years and six months. The exercise prices of the options outstanding as of September 30, 2016 ranged from $1.70 to $8.21 per share. The 44,000 stock options granted during the first nine months of 2016 had exercise prices between $6.70 and $8.21 per share. The 16,000 stock options granted during 2015 had exercise prices between $6.05 and $7.54 per share. The aggregate intrinsic value of options exercised during 2016 and 2015 approximated $32,000 and $110,000, respectively. The weighted-average grant date fair values of options granted during 2016 and 2015 were $4.16 and $3.46 per share, respectively. As of September 30, 2016, total unrecognized stock-based compensation related to non-vested stock options aggregated $238,047. That cost is expected to be recognized at a declining rate through the second quarter of 2023 (the remaining vesting period of the outstanding non-vested stock options), including $25,270 during remainder of 2016. The fair value of each stock option grant has been estimated on the date of grant using the Black-Scholes option pricing model, for the purpose discussed in Note 2(n), with the following weighted-average assumptions for the three-month and nine-month periods ended September 30, 2016 and for the year ended December 31, 2015:

 

    2016     2015  
Risk-free interest rate     1.2 %     2.0 %
Dividend yield     0 %     0 %
Expected volatility     63 %     47 %
Expected life     6.5 years       6 years  

 

The risk-free interest rate is based on U.S. Treasury yields for a maturity approximating the expected option term, while the other assumptions are derived from averages of our historical data.