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Note 7 - Share-Based Compensation Plan
 12 Months Ended
Dec. 31, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Share-Based Compensation Plan

NOTE 7 — Share-Based Compensation Plan

 

Stock Option Plan

The Company has one Stock Option Plan in effect in the two years presented: the 2004 Equity Incentive Plan (the “2004 Plan”). The 2004 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock, stock appreciation rights, and performance awards to employees, directors, and consultants of the Company. Upon ratification of the 2004 Plan by the shareholders in June 2004, shares in the 1995 Plan that had been reserved but not issued, as well as any shares issued that would otherwise return to the 1995 Plan as a result of termination of options or repurchase of shares, were added to the shares reserved for issuance under the 2004 Plan. The Company grants incentive stock options and non-statutory stock options at an exercise price per share equal to the fair market value per share of common stock on the date of grant. The vesting and exercise provisions are determined by the Board of Directors, with a maximum term of ten years. The 2004 Plan expires on April 23, 2024.

 

The Company calculates the value of each stock option grant, estimated on the date of grant, using binomial lattice option pricing model. The weighted-average estimated fair value of stock options granted during 2014 and 2013 was $0.96 and $0.77, respectively, using the following weighted-average assumptions:

 

   Years Ended December 31,
   2014  2013
Risk-free interest rate (%)    2.56%   2.01%
Dividend yield    —      —   
Volatility factor    87.44%   85.93%
Expected option life (years)    4.6    4.7 

  

The table below presents information related to sock option activity for the years ended December 31, 2014 and 2013:

 

   December 31,
   2014  2013
Total intrinsic value of stock options exercised  $20,684   $4,140 
Cash received from stock option exercises   44,771    6,480 

 

Changes in stock options for the years ended December 31, 2014 and 2013 are as follows:

 

          Outstanding Options
 
   

 

Options

Available

For Grant

    

 

Number

of Shares

    

Weighted

Average

Price Per Share

    Remaining Contractual Term
(in years)		    

 

 

Intrinsic
Value

 
Balance at December 31, 2012    62,438    1,624,188   $2.47           
   Increase in shares authorized    194,442    —                  
   Granted    (241,900)   241,900   $1.16           
   Exercised    —      (6,000)  $1.08           
   Canceled    200,918    (200,918)  $2.41           
Balance at December 31, 2013    215,898    1,659,170   $2.29           
   Increase in shares authorized    194,682    —                  
   Granted    (382,000)   382,000   $1.41           
   Exercised    —      (31,475)  $1.50           
   Canceled    118,637    (118,637)  $2.65           
Balance at December 31, 2014    147,217    1,891,058   $2.09    6.33   $969,705 
Exercisable         1,430,394   $2.32    5.67    526,341 
Unvested         460,664   $1.42    8.17    443,364 

 

 The 2004 Plan provides for an annual increase in the number of shares authorized under the plan to be added on the first day of each fiscal year equal to the lesser of 200,000 shares, four percent of the outstanding shares on that date, or a lesser amount as determined by the Board of Directors. On January 1, 2015, 2014, and 2013, a total of 200,000, 194,682, and 194,442 additional shares, respectively, became available for grant from the 2004 Plan. As of March 23, 2015, 201,200 stock options at a weighted average grant price of $2.27 per share have been granted from the 2004 Plan subsequent to December 31, 2014.

 

The following table summarizes information about stock options outstanding and exercisable at December 31, 2014:

 

  Options Outstanding  Options Exercisable
Range of
Exercise
Prices		 Number of
Options Outstanding		  Weighted Average Remaining Life (Years)  Weighted
Average Exercise Price		  Number of Options Exercisable  Weighted Average Exercise Price
$0.95 - $1.10  478,986   8.58  $0.95   212,861  $1.05
$1.20 - $1.25  58,000   8.50  $1.22   30,583  $1.20
$1.50 - $1.80  207,088   7.25  $1.71   180,747  $1.72
$1.89 - $2.27  340,035   6.42  $2.03   275,923  $2.04
$2.35 - $2.74  225,967   2.00  $2.50   149,298  $2.52
$3.04 - $3.45  577,792   5.50  $3.08   577,792  $3.08
$6.90 - $7.20  1,050   3.50  $6.94   1,050  $6.94
$10.00 - $11.70  1,790   1.67  $10.80   1,790  $10.80
$15.00  350   0.08  $15.00   350  $15.00
$0.95 - $15.00  1,891,058   6.33  $2.09   1,430,394  $2.32

 

 

Stock-Based Compensation Expense

The stock-based compensation expense included in the Company’s statement of operations for the years ended December 31, 2014 and 2013, consisted of the following:

 

   Years Ended December 31,
Income Statement Classification  2014  2013
  Cost of revenues   $21,597   $26,196 
  Research and development    54,679    72,104 
  Sales and marketing    33,030    43,970 
  General and administrative    95,372    107,434 
   $204,678  $249,704

  

As of December 31, 2014, the total remaining unamortized stock-based compensation expense was $365,279, and is expected to be amortized over a weighted average period of 2.72 years.