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12. STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

12. STOCK-BASED COMPENSATION

Pursuant to the Company’s Amended and Restated 2007 Equity Incentive Plan, the aggregate number shares of the Company’s common stock available for grant of stock options and issuance is 4,341,989 shares. As of December 31, 2014, the number of shares of the Company’s common stock available for issuance is 843,489.

The fair value of each option award below is estimated on the date of grant using the Black-Scholes option-pricing model. The risk free rate is based on the yield-to-maturity in continuous compounding of the US Government Bonds with the time-to-maturity similar to the expected tenor of the option granted, volatility is based on the annualized historical stock price volatility of the Company, and the expected life is based on the estimated average of the life of options using the “simplified” method, as prescribed in FASB ASC 718, due to insufficient historical exercise activity during recent years as a basis from which to estimate future exercise patterns.

In early March 2013, the Company granted to an independent director an option to purchase 12,500 shares of the Company’s common stock at an exercise price of $1.12 per share and the options vested immediately. The options were valued at $4,900 fair value, with assumed 74.73% volatility, a three-year expiration term with expected tenor of 1.49 years, a risk free rate of 0.19% and no dividend yield.

On May 7, 2013, the Company granted to an independent director an option to purchase 12,500 shares of the Company’s common stock at an exercise price of $1.06 per share and the options vested immediately. The options were valued at $3,700 fair value, with assumed 63.30% volatility, a three-year expiration term with expected tenor of 1.49 years, a risk free rate of 0.16% and no dividend yield.

On May 30, 2013, the Company granted to 3 executive officers and 17 management staff options to purchase 600,000 shares and 203,000 shares of the Company’s common stock, respectively, at an exercise price of $0.952 per share and the options vested immediately. The options were valued at $394,100 and $133,300 fair value, respectively, both with assumed 80.76% volatility, a four-year expiration term with expected tenor of 2 years, a risk free rate of 0.29% and no dividend yield.

On July 2, 2013, the Company granted to an independent director an option to purchase 12,500 shares of the Company’s common stock at an exercise price of $1.17 per share and the options vested immediately. The options were valued at $4,100 fair value, with assumed 61.56% volatility, a three-year expiration term with expected tenor of 1.49 years, a risk free rate of 0.24% and no dividend yield.

On November 8, 2013, the Company granted to an independent director an option to purchase 12,500 shares of the Company’s common stock at an exercise price of $2.12 per share and the options vested immediately. The options were valued at $8,500 fair value, with assumed 66.49% volatility, a three-year expiration term with expected tenor of 1.50 years, a risk free rate of 0.21% and no dividend yield.

In early March 2014, the Company granted to an independent director an option to purchase 12,500 shares of the Company’s common stock at an exercise price of $2.55 per share and the options vested immediately. The options were valued at $10,200 fair value, with assumed 67.14% volatility, a three-year expiration term with expected tenor of 1.49 years, a risk free rate of 0.21% and no dividend yield.

On May 7, 2014, the Company granted to an independent director an option to purchase 12,500 shares of the Company’s common stock at an exercise price of $1.83 per share and the options vested immediately. The options were valued at $7,900 fair value, with assumed 69.24% volatility, a three-year expiration term with expected tenor of 1.49 years, a risk free rate of 0.25% and no dividend yield.

On June 30, 2014, the Company granted to an independent director an option to purchase 12,500 shares of the Company’s common stock at an exercise price of $2.15 per share and the options vested immediately. The options were valued at $8,200 fair value, with assumed 64.48% volatility, a three-year expiration term with expected tenor of 1.50 years, a risk free rate of 0.27% and no dividend yield.

On November 10, 2014, the Company granted to an independent director an option to purchase 12,500 shares of the Company’s common stock at an exercise price of $1.39 per share and the options vested immediately. The options were valued at $4,600 fair value, with assumed 65.49% volatility, a three-year expiration term with expected tenor of 1.50 years, a risk free rate of 0.32% and no dividend yield.

On November 19, 2014, the Company granted to 20 management staff options to purchase 685,000 shares of the Company’s common stock, respectively, at an exercise price of $0.978 per share and the options vested immediately. The options were valued at $311,500 fair value, respectively, with assumed 63.20% volatility, a four-year expiration term with expected tenor of 2 years, a risk free rate of 0.52% and no dividend yield.

During the year ended December 31, 2013, 213,131 shares of common stock were issued upon cashless exercise of 344,000 options.

During the year ended December 31, 2014, 145,813 shares of common stock were issued upon cashless exercise of 223,000 options.

The following table summarizes all Company stock option transactions between January 1, 2013 and December 31, 2014.

	Number of Option and Warrants Outstanding and exercisable				Weighted- Average Exercise price of Option and Warrants		Range of Exercise Price per Common Share
Balance, December 31, 2012			1,974,471		$4.00		$	0.95 - $12.60
Granted and vested during the year ended December 31, 2013			853,000		$0.98		$	0.95 - $2.12
Exercised during the year ended December 31, 2013			(344,000	)	$0.95		$	0.95
Expired during the year ended December 31, 2013			(12,500	)	$10.43		$	10.43
Balance, December 31, 2013			2,470,971		$3.36		$	0.95 - $12.60
Granted and vested during the year ended December 31, 2014			735,000		$1.05		$	0.98 - $2.55
Exercised during the year ended December 31, 2014			(223,000	)	$0.95		$	0.95
Expired during the year ended December 31, 2014			(238,971	)	$9.56		$	2.41 - $12.00
Balance, December 31, 2014			2,744,000		$2.38		$	0.95 - $12.60

		Stock and Warrants Options Exercisable and Outstanding
		Outstanding at December 31, 2014				Range of Exercise Prices				Weighted Average Remaining Contractual Life (Years)				Weighted Average Exercise Price of Options Currently Outstanding
Exercisable and outstanding			2,744,000			$	0.95 - $12.60				1.95			$	2.38

The aggregate intrinsic value of options outstanding and exercisable as of December 31, 2014 was $345,652.

The total intrinsic value of options exercised during the year ended December 31, 2014 and 2013 was $400,954 and $542,202.

Tabular disclosure of components of a stock option or other award plan under which equity-based compensation is awarded to employees, typically comprised of the amount of unearned compensation (deferred compensation cost), compensation expense, and changes in the quantity and fair value of the shares (or other type of equity) granted, exercised, forfeited, and issued and outstanding pertaining to that plan. Disclosure may also include nature and general terms of such arrangements that existed during the period and potential effects of those arrangements on shareholders, effect of compensation cost arising from equity-based payment arrangements on the income statement, method of estimating the fair value of the goods or services received, or the fair value of the equity instruments granted, during the period, cash flow effects resulting from equity-based payment arrangements and, for registrants that accelerate vesting of out of the money share options, reasons for the decision to accelerate.

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