STOCKHOLDERS' EQUITY

6 Months Ended

Jun. 30, 2015

Stockholders' Equity Note [Abstract]

STOCKHOLDERS' EQUITY

Note 6 – Stockholders’ Equity

Preferred Stock

The Company is authorized to issue 2,000,000 shares of preferred stock, of which none were issued or outstanding as of June 30, 2015 and December 31, 2014.

Common Stock, Options and Stock Grants

Six Months Ended June 30, 2015

During the six months ended June 30, 2015, 135,000 restricted common shares were granted with an aggregate grant date fair value of approximately $100,000.  During this time, approximately 54,000 restricted common shares with an aggregate grant date fair value of approximately $44,000 vested.

During the six months ended June 30, 2015, the Company issued 111,602 shares of restricted common stock pursuant to the Company’s Directors’ Deferred Compensation Plan dated January 1, 2008 (the “Directors’ Deferred Compensation Plan”).  These shares were issued to settle approximately $103,175 of accrued directors’ fees to two former directors for past services.

During the six months ended June 30, 2015, the Company recognized $60,466 of stock based compensation expense related to the expected vesting of 83,670 options. Outstanding options vest over a four year period, with 25% vesting on the first anniversary of the grant date and the remaining 75% vesting in equal monthly amounts through the fourth anniversary of the grant date.  In March 2015, 90,000 options were awarded to employees. These options vest over three years with 33% vesting at the end of each of the three years. These options expire after a five year term.  The Company estimates the grant date fair value of the stock option using the Black-Scholes-Merton option model and the following assumptions:  volatility of 90%, risk free rate of 0.89%, dividend rate of zero, and expected term of 3.75 years.  The grant date fair value of the stock options issued was determined to be approximately $44,100.

Six Months Ended June 30, 2014

During the six months ended June 30, 2014, 39,505 shares of restricted common stock with an aggregate grant date fair value of approximately $38,000 vested. In connection with the reduction of the size of the board from seven to five directors and the ensuing restructuring of board compensation, members of the Board of Directors forfeited 40,398 shares of unvested restricted stock grants. The restructured board compensation approved by the Board of Directors provides that each non-Executive member of the Board would receive equal amounts: (i) $25,000 of the Company’s common stock annually at the beginning of each year, vesting over a two year period, and (ii) $10,000 in cash to be paid 25% each quarter in arrears and which may be converted into common stock in accordance with the terms of the Directors Deferred Compensation Plan. During the six months ended June 30, 2014, the Company granted 114,058 shares of restricted common stock with a grant date fair value of approximately $115,000.  During the six months ended June 30, 2014, the Company granted, to employees of the Company, options to acquire 10,000 shares of common stock with an exercise price of $1.50 exercisable over a term of five years from the date of grant.  The options vest over a four year period, with 25% vesting on the first anniversary of the grant date and the remaining 75% vesting in equal monthly amounts through the fourth anniversary of the grant date. The Company estimated the grant date fair value of the stock options using the Black-Scholes option model and the following assumptions: volatility of 95%, risk free rate of 0.8%, dividend rate of zero, and expected term of 3.75 years. The grant date fair value of the stock options issued was determined to be approximately $7,500.  During the six months ended June 30, 2014, the Company recognized approximately $54,000 of expenses related to the vesting of outstanding stock options.

Stock Option Plans

The Company has granted options under multiple stock-based compensation plans that do not differ substantially in the characteristics of the awards.  Nonqualified and incentive stock options have been granted to directors, officers and employees of the Company under the Company’s stock option plans.  Options generally vest over three to four years and expire five years from the date of the grant.  On June 3, 2014, the Company’s stockholders approved the adoption of the 2014 Stock Incentive Plan (the “2014 Plan”).  The 2014 Plan replaces the 2004 Stock Option/Stock Issuance Plan which expired on August 20, 2014.  The 2014 Plan provides for the grant of non-qualified stock options, incentive stock options, and stock appreciation rights, shares of restricted stock, stock units and shares of unrestricted stock.  Eligible participants include officers, employees and directors.  The aggregate number of shares authorized for issuance under the 2014 Plan is 1,200,000, and is subject to adjustment as described in the 2014 Plan.  As of June 30, 2015, 844,585 shares were available for issuance under the 2014 plan.  Awards that expire or are cancelled without delivery of shares generally become available for issuance under the plans.

The following is a summary of stock option activity for six months ended June 30, 2015, relating to all of the Company’s common stock plans:

					Weighted Average Remaining Contractual Term
			Weighted Average Exercise
	Shares						Aggregate Intrinsic Value
	(in thousands)		Price		(in years)		(in thousands)
Outstanding at January 1, 2015		549		$1.30		2.72		$--
Granted		90		$0.90		4.76		$--
Forfeited		(10)		$1.50
Outstanding at June 30, 2015		629		$1.24		2.66		$--
Exercisable at June 30, 2015		357		$1.24		2.08		$--

The following table summarizes stock option information as of June 30, 2015:

Outstanding Options

		Weighted Average
	Number Outstanding	Remaining	Options Exercisable
Exercise Prices	(in thousands)	Contractual Life	(in thousands)
$0.90	90	4.76 years	0
$1.15	335	1.81 years	261
$1.20	24	1.23 years	24
$1.50	80	3.47 years	30
$1.65	100	3.29 years	42
Total	629	2.66 years	357

As of June 30, 2015, there was approximately $175,000 of unrecognized compensation costs related to stock options outstanding.

Restricted Stock Grants

A summary of the status of the Company’s non-vested stock grants as of June 30, 2015 and changes during the six months then ended is presented below:

Non-Vested Shares	Shares (in thousands)			Weighted-Average Grant Date Fair Value
Non-Vested at January 1, 2015		51		$	0.89
Granted		135		$	0.74
Vested		(54	)	$	0.81
Non-Vested at June 30, 2015		132		$	0.78

The future expected expense as of June 30, 2015 for non-vested shares is approximately $101,000 and will be recognized as expense through December 31, 2016.