Share Based Compensation

9 Months Ended

Sep. 30, 2016

Share-based Compensation [Abstract]

Share Based Compensation

8. SHARE BASED COMPENSATION

The Company accounts for the issuance of equity awards to employees in accordance with ASC Topic 718 and 505, which requires that the cost resulting from all share based payment transactions be recognized in the financial statements. These pronouncements establish fair value as the measurement objective in accounting for share based payment arrangements and requires all companies to apply a fair value based measurement method in accounting for all share based payment transactions with employees.

All stock-based compensation is included in operating expenses for the periods as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Compensation cost recognized
Selling, general and administrative	$	125,581	$	396,654	$	763,938	$	642,169
Research and development		9,348		21,830		38,685		43,723
	$	134,929	$	418,484	$	802,623	$	685,892

The Company uses the Black-Scholes option pricing model to value the options. The table below presents the weighted average expected life of the options in years. The expected life computation is based on the time to option expiration. Volatility is determined using changes in historical stock prices. The interest rate for periods within the expected life of the award is based on the U.S. Treasury yield curve in effect at the time of grant.

The fair value of share-based payment units was estimated using the Black-Scholes option pricing model with the following assumptions and weighted average fair values as follows:

	Nine Months Ended
	September 30, 2016
Valuation assumptions:
Stock price		$1.01 - $1.93
Exercise price		$1.01 - $1.93
Expected dividend yield		0	%
Expected volatility		96.77% - 97.32	%
Expected life (in years)		5
Risk-free interest rate		0.94% - 1.35	%

Stock option activity under the 1998, 1999, 2001, 2003, 2006 and 2015 Stock Option Plans (collectively, the “Plans”) during the periods indicated below were as follows:

	Number of Shares Subject to Issuance			Weighted- average Exercise Price		Weighted- average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2015		1,901,298		$	1.46		4.51 years	$	-
									-
Granted		253,543			1.22				-
Forfeited or expired		(157,794	)		2.59				-
Exercised		(345,127	)		1.13				-
Outstanding at September 30, 2016		1,651,920		$	1.38		3.86 years	$	835,849
Exercisable at September 30, 2016		1,023,796		$	1.31		3.85 years	$	540,134

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had they all exercised their options on September 30, 2016. This amount changes based upon the fair market value of the Company’s stock.

As of September 30, 2016, the Company had 921,831 shares available for future grants under the Plans.

Restricted Stock Units

The Company issues Restricted Stock Units (“RSUs”) which are equity-based instruments that may be settled in shares of common stock of the Company. During the nine months ended September 30, 2016, the Company issued RSUs to certain directors and officers as compensation. RSU agreements can vest immediately or with the passage of time. The vesting of all RSUs is contingent on continued board and employment services.

The compensation expense incurred by the Company for RSUs is based on the closing market price of the Company’s common stock on the date of grant and is amortized ratably on a straight-line basis over the requisite service period and charged to general and administrative expense with a corresponding increase to additional paid-in capital.

	Number of Shares			Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding at December 31, 2015		67,077		$	1.56	$	-
Granted		80,453			1.69		-
Vested and settled in Shares		(104,064	)		1.58		-
Outstanding at September 30, 2016		43,466		$	1.76	$	1,691

As of September 30, 2016, there was $592,435 of total unrecognized compensation cost, net of estimated forfeitures, related to all unvested stock options and restricted stock units, which is expected to be recognized over a weighted average period of approximately 2.1 years.

Warrants

All previously granted warrants were issued with an exercise price that was equal to or above the fair market value of the Company’s common stock on the date of grant. As of September 30, 2016, the Company had 688,301 remaining warrants outstanding and exercisable through 2021. No warrants were exercised during the nine months ended September 30, 2016.