Stockholders' Equity

12 Months Ended

Dec. 31, 2014

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

16. Stockholders’ Equity

Stock Options

The Company has adopted GAAP USA which requires all stock-based payments to employees, including grants of employee stock options, to be recognized in the consolidated financial statements based on their grant-date fair values.

The Compensation Committee administers the stock-based plans. The exercise price for Incentive Stock Options (“ISO”) cannot be less than the fair value of the stock subject to the option on the grant date (110% of such fair value in the case of ISOs granted to a stockholder who owns more than 10% of the Company’s Common Stock). The exercise price of a Non-Qualified Stock Options (“NQSO”) shall be fixed by the Compensation Committee at whatever price the Committee may determine in good faith. Unless the Committee determines otherwise, options beginning with the 2007 Plan generally have a 4-year term with a 3-year vesting schedule. Unless the Committee provides otherwise, options terminate upon the termination of a participant’s employment, except that the participant may exercise an option to the extent it was exercisable on the date of termination and for a period of time after termination. Officers, directors and employees of, and consultants to the Company, or any parent or subsidiary corporation selected by the Committee, are eligible to receive options under the Plan. Subject to certain restrictions, the Committee is authorized to designate the number of shares to be covered by each award, the terms of the award, the date on which and the rates at which options or other awards may be exercised, the method of payment, vesting and other terms.

The Company has applied the Black-Scholes model to value stock-based awards. That model incorporates various assumptions in the valuation of stock-based awards relating to the risk-free rate of interest to be applied, the estimated dividend yield and expected volatility of the Company’s Common Stock. The risk-free rate of interest is the U.S. Treasury yield curve for periods within the expected term of the option at the time of grant. The expected volatility is based on historical volatility of the Company’s Common Stock.

The valuation assumptions we have applied to determine the value of stock-based awards were as follows:

Historical stock price volatility: The Company used the weekly closing price to calculate historical annual volatility.

Risk-free interest rate: The Company bases the risk-free interest rate on the rate payable on US treasury securities in effect at the time of the grant.

Expected life: The expected life of the option represents the period of time options are expected to be outstanding. The Company uses an expected life of 3.75 years.

Dividend yield: The estimate for dividend yield is 0.0%, as the Company did not issue dividends during 2014.

Estimated forfeitures: When estimating forfeitures, the Company considers historical terminations as well as anticipated retirements.

The Company, at the discretion of the board, may issue options in excess of the total available, if options related to that stock plan are cancelled. In some cases, not all shares that are available to a stock plan are issued, as the Company is unable to issue options to a previous plan when a new plan is in place.

The Company’s pre-tax income for the fiscal year ended December 31, 2014 and 2013 includes approximately $77,000 and $120,000, respectively, of compensation costs related to share-based payments. As of December 31, 2014, there is $43,000 of unrecognized compensation expense related to non-vested stock option grants. We expect approximately $29,000, $11,000, and $3,000 to be recognized during 2015, 2016, and 2017 respectively.

On April 12, 2001, the Board of Directors approved for adoption, effective December 27, 2001, the 2001 Stock Option Plan (“2001 Plan”). The 2001 Plan authorizes the grant of options to purchase up to an aggregate of 119,050 shares of the Company’s Common Stock. As of December 31, 2014, 139,958 options (including cancelled shares re-issued under the Plan) have been granted and were fully vested at the time of grant; 2,000 remain outstanding. No options were exercised during 2014.

On April 24, 2002, the Board of Directors approved for adoption, effective October 12, 2002, the 2002 Stock Option Plan (“2002 Plan”). The 2002 Plan authorizes the grant of options to purchase up to an aggregate of 142,860 shares of the Company’s Common Stock. As of December 31, 2014, 123,430 options have been granted and were fully vested at the time of grant; 27,500 remain outstanding. No options were exercised during 2014.

On April 10, 2009, the Board of Directors approved for adoption, and on June 5, 2009, the shareholders of the Company approved the 2009 Stock Incentive Plan (“2009 Plan”). The 2009 Plan authorizes the issuance of up to 250,000 shares of stock or options to purchase stock of the Company. As of December 31, 2014, 201,000 options have been granted; 185,000 remain outstanding of which 102,599 are vested and 82,401 are not vested. Of the total outstanding options, 20,000 have vesting schedule A, 21,000 have vesting schedule B, 20,000 have vesting schedule C, 114,000 have vesting schedule D and 10,000 were fully vested on December 31, 2012. Vesting schedules for the 2009 Plan are as follows: 

Vesting Schedule A		Vesting Schedule B		Vesting Schedule C		Vesting Schedule D
25%	12 months	33%	24 months	50%	48 months	20%	6 months
50%	24 months	67%	36 months	100%	57 months	40%	18 months
75%	36 months	100%	48 months			60%	30 months
100%	48 months					80%	42 months
						100%	54 months

No options were exercised during the years ended December 31, 2014 and December 31, 2013.

The following is a summary of the activity in the Company’s stock option plans and other options for the years ended December 31, 2014 and 2013, respectively:

	December 31, 2014				December 31, 2013
			Weighted Avg.				Weighted Avg.
	Shares		Exercise Price		Shares		Exercise Price
Exercisable, beginning of period		83,718	$	4.67		47,000	$	4.03
Vested		56,464		5.76		36,718		5.49
Exercised		-		-		-		-
Cancelled		8,083		5.77		-		-
Exercisable at the end of period		132,099	$	5.07		83,718	$	4.67

	December 31, 2014				December 31, 2013
			Weighted Avg.				Weighted Avg.
	Shares		Exercise Price		Shares		Exercise Price
Outstanding, beginning of period		228,500	$	5.23		218,500	$	5.21
Granted		-		-		10,000		5.75
Exercised		-		-		-		-
Cancelled		(14,000)		5.68		-		-
Outstanding at the end of period		214,500	$	5.20		228,500	$	5.23

At December 31, 2014, available options to grant were 49,000 under the 2009 Plan.

Significant option groups remained outstanding at December 31, 2014 and related weighted average grant date fair value, remaining life and intrinsic value information are as follows:

	Options Outstanding								Options Vested
Options by			Weighted		Remain.		Intrinsic				Weighted		Remain.		Intrinsic
Grant Date	Shares		Avg.		Life		Val		Shares		Avg.		Life		Val
Dec 2005		29,500	$	2.88		1.0	$	25,960		29,500	$	2.88		1.0	$	25,960
Dec 2010		65,000		6.15		1.0		-		55,000		6.08		1.0		-
Jan 2011		6,000		5.96		1.0		-		3,999		5.96		1.0		-
Nov 2012		104,000		5.17		2.9		-		41,600		5.17		2.9		-
Nov 2013		10,000		5.75		3.9		-		2,000		5.75		3.9		-
TOTAL		214,500	$	5.20		2.1	$	25,960		132,099	$	5.07		1.6	$	25,960

Warrants

On July 17, 2012, the Company issued detachable warrants in connection with the Note and Warrant Purchase Agreement with BMO Equity (see Note 8). The warrants are exercisable at any time after July 17, 2012 and until July 17, 2022, or 18 months after full payment of the related $5,000,000 note payable, whichever is earlier, for up to 4% of the outstanding units of the Company (on a fully diluted basis) on the date of exercise. The warrants are exercisable at the purchase price of $0.01 per unit. At inception, the fair value allocated to the warrants of $703,000 was separately reflected as a noncurrent liability in the consolidated balance sheet.

The fair value of the detachable warrants was estimated on the date of the grant using the Black-Scholes option-pricing model. This model uses the assumptions listed in the table below as of July 17, 2012 (initial valuation date of the warrants). In the valuation of the warrants, it was determined that the warrants were required to be carried as a derivative liability at fair value. Changes in the fair value of the warrants have been recognized in the consolidated statement of operations.

	December 31,			December 31,			December 31,			July 17,
	2014			2013			2012			2012
Weighted average fair value per warrant	$	3.76		$	5.84		$	4.87		$	5.03
Risk-free interest rate		2.47	%		2.45	%		1.18	%		0.99	%
Expected lives		5.0 yrs.			6.0 yrs.			7.0 yrs.			7.5 yrs.
Expected volatility		44.99	%		37.49	%		28.18	%		36.98	%

The following is a summary of the activity of the Company’s warrants for the years ended December 2014 and 2013:

	December 31, 2014				December 31, 2013
			Weighted Avg.				Weighted Avg.
	Shares		Exercise Price		Shares		Exercise Price
Outstanding and exercisable, beginning of period		140,048	$	0.01		140,048	$	0.01
Granted		-		-		-		-
Exercised		-		-		-		-
Cancelled		-		-		-		-
Outstanding and exercisable at the end of period		140,048	$	0.01		140,048	$	0.01

The warrants outstanding and exercisable as of December 31, 2014 have a remaining life of 7.5 years and a fair value of $525,000.