ACCOUNTING FOR STOCK BASED COMPENSATION | 3 Months Ended |
Mar. 31, 2015 |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Disclosure of Compensation Related Costs, Share-based Payments [Text Block] | NOTE 7 - ACCOUNTING FOR STOCK BASED COMPENSATION |
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The Company follows the provisions of ASC 718, “Share-Based Payment.” The Company’s results for the three-month periods ended March 31, 2015 and 2014 include share-based compensation expense totaling $85,963 and $57,884, respectively. Such amounts have been included in the Condensed Consolidated Statements of Operations within operating expenses. |
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Incentive Compensation Plan: |
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In 2012, the Company’s Board of Directors and shareholders approved the 2012 Incentive Compensation Plan (the “Initial 2012 Plan”), which provides for the grant of restricted stock awards, non-qualified stock options and incentive stock options in compliance with the Internal Revenue Code of 1986, as amended, to employees, officers, directors, consultants and advisors of the Company who are expected to contribute to the Company’s future growth and success. When originally approved, the Initial 2012 Plan provided for the grant of awards relating to 2,000,000 shares of common stock, plus those shares still available under the Company’s prior incentive compensation plan. In June 2014, the Company’s shareholders approved the Amended and Restated 2012 Incentive Compensation Plan (the “2012 Plan”) allowing for an additional 1,658,045 shares of the Company’s common stock to be available for future grants under the 2012 Plan. As of March 31, 2015, there were 2,359,000 shares available for issuance under the 2012 Plan, including those shares available under the Company’s prior incentive compensation plan as of such date. |
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All service-based options granted have ten-year terms from the date of grant and vest annually and become fully exercisable after a maximum of five years. Performance-based options granted have ten-year terms and vest and become fully exercisable when determinable performance targets are achieved. Performance targets are agreed to, and approved by, the Company’s Board of Directors. |
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Provisions of the 2012 Plan require that all awards that are stock options be made at exercise prices equal to or greater than the fair market value on the date of the grant. |
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The Company did not grant stock option awards during the three-month periods ended March 31, 2015 and 2014. |
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The following summarizes the components of share-based compensation expense by equity type for the three-months ended March 31: |
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| | Three Months Ended | |
March 31, |
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| | 2015 | | | 2014 | |
Service-based Restricted Common Stock | | $ | 49,800 | | | $ | 57,844 | |
Performance-based Restricted Common Stock | | | 6,128 | | | | — | |
Performance-based Stock Options | | | 30,035 | | | | — | |
Total Share-Based Compensation Expense | | $ | 85,963 | | | $ | 57,884 | |
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Stock-based compensation for the three-months ended March 31, 2015 and 2014 is included in general and administrative expenses in the accompanying condensed consolidated statement of operations. |
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Restricted Common Stock Awards: |
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In June 2014, the Company granted 80,000 shares of restricted common stock to certain directors of the Company under the 2012 Plan. The shares were granted at a price of $2.49 per share and will fully vest on the date of the Company’s next annual shareholders meeting to be held in June 2015, or a vesting period of approximately one year. The total compensation expense to be recognized over the vesting period is $199,200. |
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A summary of the status of the Company’s non-vested restricted common stock, as granted under the Company’s approved stock compensation plans, as of March 31, 2015, and changes during the three-months ended March 31, 2015, are presented below: |
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| | | | | | Weighted Average | |
| | | | | | Grant Date | |
Non-vested Restricted Shares | | Number of Shares | | | Fair Value | |
Non-vested at January 1, 2015 | | | 180,000 | | | $ | 2.09 | |
Granted | | | — | | | | — | |
Forfeited | | | — | | | | — | |
Vested | | | — | | | | — | |
Non-vested at March 31, 2015 | | | 180,000 | | | $ | 2.09 | |
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Under the terms of the performance-based restricted common stock award agreements (for the 100,000 awards granted in 2013), the awards will fully vest and become exercisable on the date on which the Company’s Board of Directors shall have determined that specific financial milestones have been met, provided the employee remains in the employ of the Company at such time; provided, however, upon a Change in Control (as defined in the award agreements and the 2012 Plan), the restricted stock shall automatically vest as permitted by the 2012 Plan. The Company’s Board of Directors adopted specific revenue and earnings performance targets as vesting conditions. As of March 31, 2015, management has determined the performance conditions related to these restricted stock awards are probable to be achieved by the year ending 2020. As a result, the Company adjusted the amortization of the fair market value of these awards over the revised implicit service period from December 2017 to December 2020. If management determines in future periods the achievement of performance conditions are probable to occur sooner than expected, the Company will accelerate the expensing of any unamortized balance as of that determination date. |
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As of March 31, 2015, the unearned compensation related to Company granted restricted common stock was $190,718 of which $49,800 (pertaining to 80,000 restricted common stock awards) will be amortized on a straight-line basis through the date of the Company’s next annual shareholders meeting to be held in June 2015, the vesting date. The remaining balance of $140,918 (pertaining to 100,000 performance-based restricted common stock awards issued in 2013) will be amortized on a straight-line basis through December 31, 2020, the revised implicit service period. |
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Performance-Based Stock Option Awards: |
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A summary of performance-based stock option activity, and related information for the three-months ended March 31, 2015 follows: |
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| | | | | Weighted Average | |
| | Options | | | Exercise Price | |
Outstanding, January 1, 2015 | | | 2,070,000 | | | $ | 1.33 | |
Granted | | | — | | | | — | |
Exercised | | | — | | | | — | |
Forfeited | | | — | | | | — | |
Expired | | | — | | | | — | |
Outstanding, March 31, 2015 | | | 2,070,000 | | | $ | 1.33 | |
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Options exercisable: | | | | | | | | |
31-Mar-15 | | | 1,120,000 | | | $ | 0.95 | |
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The aggregate intrinsic value of performance-based stock options outstanding (regardless of whether or not such options are exercisable) as of March 31, 2015 and December 31, 2014 was $2,743,650 and $2,792,690, respectively. The aggregate intrinsic value of performance-based stock options exercisable as of March 31, 2015 and December 31, 2014 was $1,860,150 and $1,882,550, respectively. |
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Under the terms of the performance-based stock option agreements, the awards will fully vest and become exercisable on the date on which the Company’s Board of Directors shall have determined that specific financial performance milestones have been met, provided the employee remains in the employ of the Company at such time; provided, however, upon a Change in Control (as defined in the stock option agreements and the 2012 Plan), the stock options shall automatically vest as permitted by the 2012 Plan. As of March 31, 2015, management has determined the performance conditions related to these stock option awards are probable to be achieved by the year ending 2020. As a result, the Company adjusted the amortization of the fair market value of these awards over the revised implicit service period from December 2017 to December 2020. If management determines in future periods the achievement of performance conditions are probable to occur sooner than expected, the Company will accelerate the expensing of any unamortized balance as of that determination date. |
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As of March 31, 2015, the unearned compensation related to the 950,000 performance-based stock options granted in August 2013 (weighted average per share exercise price of $1.77) is $690,809, which will be amortized on a straight-line basis through December 31, 2020, the implicit service period. |
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The Company’s performance-based stock options granted prior to 2013 (consisting of 1,150,000 options) are fully amortized. |
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Service-Based Stock Option Awards: |
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A summary of service-based stock option activity, and related information for the three-months ended March 31, 2015 follows: |
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| | | | | Weighted Average | |
| | Options | | | Exercise Price | |
Outstanding, January 1, 2015 | | | 522,000 | | | $ | 2.51 | |
Granted | | | — | | | | — | |
Exercised | | | — | | | | — | |
Forfeited | | | — | | | | — | |
Expired | | | (24,000 | ) | | $ | 2.55 | |
Outstanding, March 31, 2015 | | | 498,000 | | | $ | 2.51 | |
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Options exercisable: | | | | | | | | |
31-Mar-15 | | | 498,000 | | | $ | 2.51 | |
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The aggregate intrinsic value of service-based stock options exercisable as of March 31, 2015 and December 31, 2014 was $95,000 and $102,640, respectively. |
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At March 31, 2015, the Company’s service-based stock options are fully amortized. |