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13. STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2016

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 of shares of the Company’s common stock available for grant and issuance of stock options 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 increased to 10,341,989. As of December 31, 2016, the number of shares of the Company’s common stock available for issuance under the Plan is 7,338,489.

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 historical option exercise pattern.

On March 2, 2016, 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 $1.78 per share and the options vested immediately. The options were valued at $7,300 fair value, with assumed 65.69% volatility, a three-year expiration term with expected tenor of 1.33 years, a risk free rate of 0.71% and no dividend yield.

On May 7, 2016, 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 $1.45 per share and the options vested immediately. The options were valued at $5,500 fair value, with assumed 66.40% volatility, a three-year expiration term with an expected tenor of 1.33 years, a risk free rate of 0.58% and no dividend yield.

On July 1, 2016, 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 $1.54 per share and the options vested immediately. The options were valued at $4,600 fair value, with assumed 52.38% volatility, a three-year expiration term with expected tenor of 1.33 years, a risk free rate of 0.49% and no dividend yield.

On November 10, 2016, 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 $2.17 per share and the options vested immediately. The options were valued at $7,200 fair value, with assumed 51.78% volatility, a three-year expiration term with expected tenor of 1.69 years, a risk free rate of 0.85% and no dividend yield.

On December 18, 2016, the Company granted to a consultant to purchase 30,000 shares of the Company’s common stock, respectively, at an exercise price of $2.10 per share and the options vested immediately. The options were valued at $15,700 fair value, respectively, with assumed 50.67% volatility, a three-year expiration term with expected tenor of 1.50 years, a risk free rate of 1.06% and no dividend yield.

For the year ended December 31, 2016 and 2015, total compensation costs for options issued recorded in the consolidated statement of income were $40,300 and $374,600. There were no related tax benefits as a full valuation allowance was recorded in the years ended December 31, 2016 and 2015.

During the year ended December 31, 2016, 776,671 shares of common stock were issued upon cashless exercise of 1,831,500 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, 2015 and December 31, 2016.

		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, 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
Granted and vested during the year ended December 31, 2016			80,000			$1.87				$1.45 - $2.17
Exercised during the year ended December 31, 2016			(1,831,500	)		$1.11				$0.95-$1.45
Expired during the year ended December 31, 2016			(462,500	)		$2.24				$0.95 - $12.60
Balance, December 31, 2016			185,000			$2.19				$1.54 - $4.80

		Stock and Warrants Options Exercisable and Outstanding
						Weighted Average		Weighted Average
		Outstanding				Remaining		Exercise Price of
		at December 31, 2016		Range of Exercise Prices		Contractual Life (Years)		Options Currently Outstanding
Exercisable and outstanding		185,000		$1.54 - $4.80		1.85		$2.19

All options exercisable and outstanding at December 31, 2016 are fully vested.

The aggregate intrinsic value of options outstanding and exercisable as of December 31, 2016 was $16,825.

The total intrinsic value of options exercised during the years ended December 31, 2016 and 2015 was $1,479,042 and $236,535.