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13. STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2015

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

13. STOCK-BASED COMPENSATION

Pursuant to the Company’s Amended and Restated 2007 Equity Incentive Plan approved in 2011(“Plan”), the aggregate number shares of the Company’s common stock available for grant of stock options and issuance is 4,341,989 shares. On October 5, 2015, during the annual meeting of the Company’s stockholders, the aggregate number of shares reserved and available for grant and issuance pursuant to the Plan was approved to be increased to 10,341,989. As of December 31, 2015, the number of shares of the Company’s common stock available for issuance is 7,005,989.

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. With more information available on options exercise activity in the past few years, from January 1, 2015 onwards, the Company estimated the expected life based on historical option exercise experience as prescribed by FASB ASC 718.

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.

In early March 2015, 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 $1.66 per share and the options vested immediately. The options were valued at $7,400 fair value, with assumed 73.55% volatility, a three-year expiration term with an expected tenor of 1.49 years, a risk free rate of 0.42% and no dividend yield.

On April 8, 2015, the Company granted to 17 management staff options to purchase 275,000 shares of the Company’s common stock, respectively, at an exercise price of $1.428 per share and the options vested immediately. The options were valued at $146,400 fair value, respectively, with assumed 68.70% volatility, a four-year expiration term with an expected tenor of 0.94 years, a risk free rate of 0.20% and no dividend yield.

On April 8, 2015, the Company granted to 3 director options to purchase 300,000 shares of the Company’s common stock, respectively, at an exercise price of $1.428 per share and the options vested immediately. The options were valued at $181,400 fair value, respectively, with assumed 65.71% volatility, a four-year expiration term with an expected tenor of 1.30 years, a risk free rate of 0.31% and no dividend yield.

On May 7, 2015, 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 $2.550 per share and the options vested immediately. The options were valued at $8,600 fair value, with assumed 69.32% volatility, a three-year expiration term with an expected tenor of 0.97 years, a risk free rate of 0.23% and no dividend yield.

On July 1, 2015, 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 $2.07 per share and the options vested immediately. The options were valued at $9,500 fair value, with assumed 67.05% volatility, a three-year expiration term with an expected tenor of 1.33 years, a risk free rate of 0.41% and no dividend yield.

On November 10, 2015, 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 $1.88 per share and the options vested immediately. The options were valued at $7,000 fair value, with assumed 65.58% volatility, a three-year expiration term with expected tenor of 1.33 years, a risk free rate of 0.58% and no dividend yield.

On November 18, 2015, the Company granted to a consultant to purchase 30,000 shares of the Company’s common stock, respectively, at an exercise price of $1.71 per share and the options vested immediately. The options were valued at $14,300 fair value, respectively, with assumed 71.54% volatility, a three-year expiration term with expected tenor of 0.9 years, a risk free rate of 0.60% and no dividend yield.

In the year ended December 31, 2015 and 2014, total compensation costs for options issued recorded in the consolidated statement of income were $374,600 and $346,100. There were no related tax benefits as a full valuation allowance was recorded in the year ended December 31, 2015 and 2014.

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

During the year ended December 31, 2015, 97,244 shares of common stock were issued upon cashless exercise of 182,500 options.

The following table summarizes all Company stock option transactions between January 1, 2014 and December 31, 2015.

		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, 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
Granted and vested during the year ended December 31, 2015			655,000			$1.49				$1.43 - $2.55
Exercised during the year ended December 31, 2015			(182,500	)		$1.12				$0.95-$1.66
Expired during the year ended December 31, 2015			(817,500	)		$4.86				$2.06 - $4.97
Balance, December 31, 2015			2,399,000			$1.39				$0.95 - $12.60

		Stock and Warrants Options Exercisable and Outstanding
						Weighted Average		Weighted Average
		Outstanding				Remaining		Exercise Price of
		at December 31, 2015		Range of Exercise Prices		Contractual Life (Years)		Options Currently Outstanding
Exercisable and outstanding		2,399,000		$0.95 - $12.60		2.12		$1.39

All options exercisable and outstanding at December 31, 2015 are fully vested.

The aggregate intrinsic value of options outstanding and exercisable as of December 31, 2015 was $1,639,182.

The total intrinsic value of options exercised during the year ended December 31, 2015 and 2014 was $236,535 and $400,954.