Note 9 - Stockholders' Equity

12 Months Ended

Dec. 31, 2014

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

9. Stockholders' Equity

Common Stock.

On January 7, 2014, we issued and sold for cash an aggregate 11,299,999 shares of our common stock at a purchase price of $0.30 per share in the 2014 Transaction that resulted in gross proceeds of $3,390,000 (See Note 4).

The 2014 Transaction was recorded into the financial statements as follows:

Gross cash proceeds	$	3,390,000
Less: gross proceeds allocated to warrants liability – investors		(1,356,000	)
Gross proceeds allocated to additional paid-in capital and common stock		2,034,000
Less: cash issuance costs – legal fees		(20,000	)
Recorded in additional paid-in capital and common stock	$	2,014,000

In conjunction with the 2014 Transaction, we recorded a warrants liability of $1,356,000 as of January 7, 2014 on our Balance Sheet (See Note 8).

During 2014, the Company granted 2,399,999 options to purchase common stock to three directors and our Chief Executive Officer at a weighted average exercise price of $0.16 per share and 50,000 to employees at an exercise price of $0.13 per share. We repriced stock options of 300,000 shares from an exercise price $0.37 per share to $0.16 per share and 700,000 shares from $0.37 per share to $0.12 per share for two directors. Also, the Company issued 256,818 shares of common stock as a result of the exercise of employee stock options, at an average exercise price of $0.19 per share, which resulted in $47,800 of proceeds to the Company.

During 2013, the Company granted 700,000 options to purchase common stock to one of its directors at an exercise price of $0.37 per share, and 23,000 to an employee at an exercise price of $0.45 per share. Also, the Company issued 2,464,332 shares of common stock as a result of the exercise of employee stock options, at an average exercise price of $0.18 per share, which resulted in $433,800 of proceeds to the Company.

During 2014, the Company awarded 4,369,500 shares of restricted common stock to employees, and 2,500 to a consultant. Restricted shares vest ratably over a 33-month period commencing in the fourth month after the grant date. Upon a grantee’s termination of service to us prior to full vesting any unvested shares will be cancelled. The fair market value of the awards made to employees ranged from $0.11 to $0.34 per share, and the fair market value of the awards made to consultant at $0.20.

During 2013, the Company awarded 1,745,000 shares of restricted common stock to employees, and 122,500 to consultants. Restricted shares vest ratably over a 33-month period commencing in the fourth month after the grant date. Upon a grantee’s termination of service to us prior to full vesting any unvested shares will be cancelled. The fair market value of the awards made to employees ranged from $0.30 to $0.59 per share, and the fair market value of the awards made to consultants ranged from $0.34 to $0.56 per share.

During 2014, the Company issued 1,000,000 shares of common stock as a result of the exercise of warrants, at an average exercise price of $0.26, which resulted in $260,000 of proceeds to the Company.

During 2013, the Company issued 11,772,500 shares of common stock as a result of the exercise of warrants, at an average exercise price of $0.25, which resulted in $2,970,600 of proceeds to the Company.

Stock Repurchase Program

During the years ended December 31, 2014 and 2013, the Company did not repurchase any of its common stock under the terms of its Board-approved $1,000,000 stock repurchase program (“stock repurchase program”). As of December 31, 2014, approximately $782,600 remained available for future purchases under this program. The Company is not obligated to repurchase any specific number of shares and the stock repurchase program may be suspended or terminated at the Company’s discretion.

Stock-Based Compensation Plans

Active Plans

2012 Equity Incentive Plan. In November 2012, the Company’s 2012 Equity Incentive Plan (the “12 Plan”) was approved by the stockholders. Pursuant to the terms of the 12 Plan, stock options, stock appreciation rights, restricted stock and restricted stock units (sometimes referred to individually or collectively as “awards”) may be granted to officers and other employees, non-employee directors and independent consultants and advisors who render services to the Company. The Company is authorized to issue options to purchase up to 9,656,958 shares of common stock, stock appreciation rights, or restricted stock in accordance with the terms of the 12 Plan.

In the case of a restricted stock award, the entire number of shares subject to such award would be issued at the time of the grant and subject to vesting provisions based on time or other conditions specified by the Board or an authorized committee of the Board. For awards based on time, should the grantee’s service to the Company end before full vesting occurred, all unvested shares would be forfeited and returned to the Company. In the case of awards granted with vesting provisions based on specific performance conditions, if those conditions were not met, then all shares would be forfeited and returned to the Company. Until forfeited, all shares issued under a restricted stock award would be considered outstanding for dividend, voting and other purposes.

Under the 12 Plan, the exercise price of non-qualified stock options granted is to be no less than 100% of the fair market value of the Company’s common stock on the date the option is granted. The exercise price of incentive stock options granted is to be no less than 100% of the fair market value of the Company’s common stock on the date the option is granted provided, however, that if the recipient of the incentive stock option owns greater than 10% of the voting power of all shares of the Company’s capital stock then the exercise price will be no less than 110% of the fair market value of the Company’s common stock on the date the option is granted. The purchase price of the restricted stock issued under the 12 Plan shall also not be less than 100% of the fair market value of the Company’s common stock on the date the restricted stock is granted.

All options granted under the 12 Plan are immediately exercisable by the optionee; however, there is a vesting period for the options. The options (and the shares of common stock issuable upon exercise of such options) vest, ratably, over a 33-month period; however, no options (and the underlying shares of common stock) vest until after three months from the date of the option grant. The exercise price is immediately due upon exercise of the option. The maximum term of options issued under the 12 Plan is ten years. Shares issued upon exercise of options are subject to the Company’s repurchase, which right lapses as the shares vest. The 12 Plan will terminate no later than November 7, 2022.

During the year ended December 31, 2014, options to purchase 3,449,999 shares of common stock, with a weighted average grant date fair value of $0.14, were granted under the 12 Plan, 4,372,000 shares of restricted common stock, with a weighted average grant date fair value of $0.18 were granted, no options had been exercised and 2,267,291 shares of common stock remained available for issuance under the 12 Plan.

No options previously issued under the 12 Plan were exercised during the year ended December 31, 2014.

Grant to Consultant. In 2014 and 2013, the Company made a grant to consultants of 2,500 and 120,000 shares of restricted common stock, with a grant date fair value of $0.20 and $0.56 per share, respectively. The terms of the grant were substantially similar to those that would apply to grants made from the 12 Plan.

Inactive Plans

The following table summarizes options outstanding as of December 31, 2014 and 2013 that were granted from stock based compensation plans that are inactive. As of December 31, 2014such plans can no longer grant options.

		Options Outstanding
	Year	Beginning of Year		Granted		Exercised			Cancelled			End of Year
2008 Stock Option Plan	2014		9,618,828		—		(246,818	)		(2,922,010	)		6,450,000
2005 Equity Incentive Plan	2014		972,500		—		(10,000	)		(702,500	)		260,000
Supplemental Stock Option Agreement	2014		5,000		—		—			—			5,000
			10,596,328		—		(256,818	)		(3,624,510	)		6,715,000
2008 Stock Option Plan	2013		11,884,000		—		(1,851,832	)		(413,340	)		9,618,828
2005 Equity Incentive Plan	2013		1,447,500		—		(475,000	)		—			972,500
1998 Stock Option/Stock Issuance Plan	2013		137,500		—		(137,500	)		—			—
Supplemental Stock Option Agreement	2013		5,000		—		—			—			5,000
			13,474,000		—		(2,464,332	)		(413,340	)		10,596,328

Summary – All Plans

A summary of the status of all of the options outstanding under all of the Company’s stock option plans, and non-plan grants to consultants, as of December 31, 2014 and 2013, and changes during the years then ended, is presented in the following table:

	2014					2013
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Beginning		12,019,328		$	0.21		14,174,000		$	0.20
Granted		3,449,999		$	0.14		723,000		$	0.37
Exercised		(256,818	)	$	0.19		(2,464,332	)	$	0.18
Forfeited or expired		(4,924,510	)	$	0.24		(413,340	)	$	0.21
Ending		10,287,999		$	0.18		12,019,328		$	0.21
Exercisable at year-end		10,287,999		$	0.18		12,019,328		$	0.21
Vested or expected to vest at year-end		10,144,482		$	0. 18		11,857,821		$	0.21
Weighted average fair value of options granted during the period				$	0.18				$	0.31

As of December 31, 2014 and 2013, of the options exercisable, 6,212,761 and 8,015,960 were vested, respectively.

The following table summarizes information about stock options outstanding as of December 31, 2014:

	Options Outstanding				Options Exercisable
Range of Exercise Price	Number Outstanding		Weighted Average  Remaining Contractual  Life (Years)		Weighted  Average  Exercise Price		Number Exercisable		Weighted Average Exercise Price
$0.0500-$0.0600		783,000		4.59	$	0.0532		783,000	$	0.0532
$0.1213-$0.1213		1,400,000		9.42	$	0.1213		1,400,000	$	0.1213
$0.1370-$0.1600		1,095,000		7.67	$	0.1523		1,095,000	$	0.1523
$0.1650-$0.1650		135,000		1.74	$	0.1650		135,000	$	0.1650
$0.1690-$0.1690		1,699,999		9.92	$	0.1690		1,699,999	$	0.1690
$0.1700-$0.2000		1,210,000		7.04	$	0.1807		1,210,000	$	0.1807
$0.2020-$0.2200		854,000		5.15	$	0.2050		854,000	$	0.2050
$0.2300-$0.2300		1,878,000		6.02	$	0.2300		1,878,000	$	0.2300
$0.2800-$0.2800		1,200,000		6.69	$	0.2800		1,200,000	$	0.2800
$0.3800-$0.4450		33,000		6.97	$	0.4253		33,000	$	0.4253
$0.0500-$0.4450		10,287,999		7.27	$	0.1811		10,287,999	$	0.1811

As of December 31, 2014, there were outstanding options to purchase 10,287,999 shares of common stock with a weighted average exercise price of $0.18 per share, a weighted average remaining contractual term of 7.27 years and an aggregate intrinsic value of $94,300. Of the options outstanding as of December 31, 2014, 6,212,761 were vested, 3,931,721 were estimated to vest in future periods and 143,517 were estimated to be forfeited or to expire in future periods.

As of December 31, 2014, there was approximately $380,100 of total unrecognized compensation cost, net of estimated forfeitures, related to unvested options. That cost is expected to be recognized over a weighted-average period of approximately ten months.

During 2014, the Company awarded 4,372,000 shares of restricted common stock, which vest ratably, over a 33-month period; however, no shares vest until after three months from the date of the restricted stock award. The Company includes the common stock underlying the restricted stock award in shares outstanding once the common stock underlying the restricted stock award has vested and the restriction has been removed (“releases” or “released”).

A summary of the status of all of the Company’s unreleased restricted stock awards as of December 31, 2014 and 2013 and changes during the years then ended, is summarized in the following table.

	2014						2013
	Shares			Weighted Average Fair Value		Shares			Weighted  Average  Fair Value
Beginning unreleased		3,938,426		$	0.28		4,043,123		$	0.18
Awarded		4,372,000		$	0.16		1,867,500		$	0.44
Released		(1,474,778	)	$	0.25		(1,657,040	)	$	0.22
Forfeited		(2,520,665	)	$	0.27		(315,157	)	$	0.28
Ending unreleased		4,314,983		$	0.18		3,938,426		$	0.28

Of the restricted stock awards unreleased at December 31, 2014, 3,551,231 were estimated to be released in future periods and 763,752 were estimated to be forfeited in future periods. The aggregate fair market value of the unreleased restricted stock awards at December 31, 2014, based on the closing price of our stock as of such date of $0.14 was $604,100.

As of December 31, 2014, there was approximately $671,300 of total unrecognized compensation cost, net of estimated forfeitures, related to unreleased restricted stock awards. That cost is expected to be recognized over a weighted-average period of approximately two years.