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13. STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2017

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, 2017, the number of shares of the Company’s common stock available for issuance under the Plan is 6,714,989.

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 historical option exercise pattern.

On March 2, 2017, 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 $1.98 per share and the options vested immediately. The options were valued at $9,000 fair value, with assumed 57.42% volatility, a three-year expiration term, with an expected tenor of 1.69 years, a risk free rate of 1.59% and no dividend yield.

On May 7, 2017, 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 $1.90 per share and the options vested immediately. The options were valued at $5,700 fair value, with assumed 45.71% volatility, a three-year expiration term with an expected tenor of 1.70 years, a risk free rate of 1.25% and no dividend yield.

On July 1, 2017, 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 $1.62 per share and the options vested immediately. The options were valued at $4,500 fair value, with assumed 43.45% volatility, a three-year expiration term with expected tenor of 1.70 years, a risk free rate of 1.34% and no dividend yield.

On August 23, 2017, the Company granted to 18 members of the management staff options to purchase 281,000 shares of the Company’s common stock, at an exercise price of $1.454 per share and the options vested immediately. The options were valued at $146,700 fair value, with assumed 42.65% volatility, a four-year expiration term with an expected tenor of 1.41 years, a risk free rate of 1.26% and no dividend yield.

On August 23, 2017, the Company granted to three directors options to purchase 300,000 shares of the Company’s common stock, at an exercise price of $1.454 per share and the options vested immediately. The options were valued at $191,800 fair value, with assumed 46.47% volatility, a four-year expiration term with an expected tenor of 2.26 years, a risk free rate of 1.34% and no dividend yield.

On December 18, 2017, 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 $1.44 per share and the options vested immediately. The options were valued at $4,350 fair value, with assumed 44.16% volatility, a three-year expiration term with expected tenor of 1.66 years, a risk free rate of 1.78% and no dividend yield.

On December 18, 2017, the Company granted to a consultant to purchase 30,000 shares of the Company’s common stock, respectively, at an exercise price of $1.44 per share and the options vested immediately. The options were valued at $10,350 fair value, respectively, with assumed 44.16% volatility, a three-year expiration term with expected tenor of 1.66 years, a risk free rate of 1.78% and no dividend yield.

For the year ended December 31, 2017 and 2016, total compensation costs for options issued recorded in the consolidated statement of income were $372,400 and $40,300. There were no related tax benefits as a full valuation allowance was recorded in the years ended December 31, 2017 and 2016.

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

The following table summarizes all Company stock option transactions between January 1, 2016 and December 31, 2017.

		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, 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
Granted and vested during the year ended December 31, 2017			661,000			$	1.47				$1.44 - $1.98
Exercised during the year ended December 31, 2017			—				—				—
Expired during the year ended December 31, 2017			(37,500	)		$	2.18				$1.83-$2.55
Balance, December 31, 2017			808,500			$	1.61				$1.44 - $4.80

		Stock and Warrants Options Exercisable and Outstanding
						Weighted Average		Weighted Average
		Outstanding				Remaining		Exercise Price of
		at December 31,  2017		Range of Exercise Prices		Contractual Life  (Years)		Options Currently  Outstanding
Exercisable and outstanding		808,500		$1.44 - $4.80		3.11		$1.61

All options exercisable and outstanding at December 31, 2017 are fully vested.

The aggregate intrinsic value of options outstanding and exercisable as of December 31, 2017 was $10,571.

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

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- References

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- Definition

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.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 718
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=96867065&loc=d3e5070-113901

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 718
-SubTopic 10
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=96867065&loc=d3e5047-113901

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