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Note 7 - Share-Based Compensation Plan

12 Months Ended

Dec. 31, 2015

Share-based Compensation, Allocation and Classification in Financial Statements [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 2015 and 2014 was $1.58 and $0.96, respectively, using the following weighted-average assumptions:

		Years Ended December 31,
		2015				2014
Risk-free interest rate (%)			2.10	%			2.56	%
Dividend yield			—				—
Volatility factor			92.22	%			87.44	%
Expected option life (years)			4.8				4.6

The table below presents information related to stock option activity for the years ended December 31, 2015 and 2014:

		Years Ended December 31,
		2015				2014
Total intrinsic value of stock options exercised		$	60,056			$	20,684
Cash received from stock option exercises		$	155,949			$	44,771

Changes in stock options for the years ended December 31, 2015 and 2014 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, 2013			215,898				1,659,170			$	2.47
Increase in shares authorized			191,843				—
Granted			(382,000	)			382,000			$	1.41
Exercised			—				(31,475	)		$	1.50
Canceled			118,637				(118,637	)		$	2.65
Balance at December 31, 2014			144,378				1,891,058			$	2.09
Increase in shares authorized			200,000				—
Granted			(316,600	)			316,600			$	2.25
Exercised			—				(91,333	)		$	1.71
Canceled			93,972				(93,972	)		$	2.01
Balance at December 31, 2015			121,750				2,022,353			$	2.15				5.83			$	879,566
Exercisable							1,547,485			$	2.32				5.00				627,777
Unvested							474,868			$	1.42				8.67				251,789

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 400,000 shares, 4% of the outstanding shares on that date, or a lesser amount as determined by the Board of Directors. On January 1, 2016, 2015, and 2014, a total of 224,818, 200,000, and 191,843 additional shares, respectively, became available for grant from the 2004 Plan. As of March 18, 2016, 255,500 stock options at a weighted average grant price of $2.75 per share have been granted from the 2004 Plan subsequent to December 31, 2015.

The following table summarizes information about stock options outstanding and exercisable at December 31, 2015:

					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				414,303				7.58			$	1.01				270,686			$	1.03
	$1.20 - $1.25				58,000				7.50			$	1.22				41,583			$	1.21
	$1.50 - $1.82				186,857				6.33			$	1.70				184,532			$	1.70
	$1.89 - $2.27				539,695				7.25			$	2.11				314,964			$	2.04
	$2.36 - $2.74				260,379				2.42			$	2.48				172,601			$	2.51
	$3.04 - $3.45				560,819				4.50			$	3.08				560,819			$	3.08
	$6.90				900				2.58			$	6.90				900			$	6.90
	$10.00 - $11.70				1,400				0.75			$	10.73				1,400			$	10.73
	$0.95 - $11.70				2,022,353				5.83			$	2.15				1,547,485			$	2.24

Stock-Based Compensation Expense

The stock-based compensation expense included in the Company’s statements of income for the years ended December 31, 2015 and 2014, consisted of the following:

		Years Ended December 31,
Income Statement Classification		2015				2014
Cost of revenues		$	19,322			$	21,597
Research and development			40,951				54,679
Sales and marketing			62,898				33,030
General and administrative			86,693				95,372
		$	209,864			$	204,678

As of December 31, 2015, the total remaining unamortized stock-based compensation expense was $471,914, and is expected to be amortized over a weighted average period of 2.82 years.