Annual report pursuant to Section 13 and 15(d)

Stock Option Plans

v2.4.0.8
Stock Option Plans
12 Months Ended
Dec. 31, 2013
Stock Option Plans [Abstract]  
Stock Option Plans
Note 24 — Stock Option Plans
 
The Company has the following Stock Option Plans (the “Plan”) that allow for the granting of both statutory and incentive stock options or ISOs, which can result in potentially favorable tax treatment to the participant, and non-statutory stock options. The exercise price per share subject to an option is determined by the administrator, but in the case of an ISO must not be less than the fair market value of a share of our common stock on the date of grant and in the case of a non-statutory stock option must not be less than 100% of the fair market value of a share of our common stock on the date of grant.
 
 
 
2007 Plan
 
2009 Plan
 
Total
 
Outstanding as of December 31, 2013
 
79,009
 
135,509
 
214,518
 
Available for future issuance under plan
 
 
342,420
 
342,420
 
Totals authorized by plan
 
79,009
 
477,929
 
556,938
 
 
The Plan gives the Board of Directors of the Company the ability to determine vesting periods for all options granted under the Plan, and allows option terms to be up to ten years from the original grant date. Employees’ incentive stock options must vest at a minimum rate of 20% per year over a five year period, commencing on the date of grant. Most vest ratably over four years commencing on the date of the option grant. In the case of directors, such options are granted annually and they expire ten years after the date of their grant and vest ratably, on a monthly basis, over the next 12 months. Non-employee directors have vesting of 50% immediately on grant and the balance vest ratably, on a monthly basis, over the next 12 months. Advisors or consultants can have vesting range from 100 percent of the option grants vesting immediately to ratably, on a monthly basis, up to 48 months.
 
The following table summarizes stock option activity for the years ended December 31, 2013 and 2012:
 
 
 
 
 
Weighted
 
 
 
 
 
 
Number of
 
Average
 
 
Exercise Price
 
 
 
Shares
 
Exercise Price
 
 
Range
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding at December 31, 2011
 
267,856
 
$
8.87
 
$
0.46
$
17.50
 
Granted
 
 
$
 
$
 
 
 
 
Exercised
 
 
$
 
$
 
 
 
 
Expired or Forfeited
 
(75,127)
 
$
0.65
 
$
0.46
$
2.17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding at December 31, 2012
 
192,729
 
$
10.68
 
$
1.71
$
17.50
 
Granted
 
45,000
 
$
2.00
 
$
 
 
 
2.00
 
Exercised
 
 
$
 
$
 
 
 
 
Expired or Forfeited
 
(23,211)
 
$
2.71
 
$
1.94
$
17.50
 
Outstanding at December 31, 2013
 
214,518
 
$
9.72
 
$
1.71
$
17.50
 
 
As of December 31, 2013, there were 200,387 options that were fully vested and exercisable at weighted average exercise price of $9.71 per share. The weighted average remaining contractual term on the vested options is 5.6 years.
 
The unvested balance of 14,131 options as of December 31, 2013, are exercisable at a weighted average exercise price of $9.91 per share. The weighted average remaining contractual term on the vested options is 6.6 years.
 
The following tables summarize stock option information at December 31, 2013:
 
Total Options Outstanding
 
 
 
 
 
 
 
Weighted
 
Weighted
 
 
 
 
 
 
 
average
 
average
 
Range of exercise price
 
 
Shares
 
 
remaining life (yrs)
 
exercise price
 
 
 
 
 
 
 
 
 
 
 
 
$1.71 to $2.00
 
 
57,723
 
 
7.6
 
$
1.94
 
$7.50 to $11.25
 
 
102,637
 
 
6.6
 
$
10.67
 
$15.00 to $17.50
 
 
54,158
 
 
3.6
 
$
16.23
 
 
 
 
214,518
 
 
6.1
 
$
9.72
 
 
Exercisable Options Outstanding
 
 
 
 
 
 
 
Weighted
average
remaining life
 
Weighted
average
 
Range of exercise price
 
 
Shares
 
 
(yrs)
 
exercise price
 
 
 
 
 
 
 
 
 
 
 
 
$1.71 to $2.00
 
 
57,723
 
 
7.6
 
$
1.93
 
$7.50 to $11.25
 
 
88,506
 
 
5.6
 
$
10.78
 
$15.00 to 17.50
 
 
54,158
 
 
3.6
 
$
16.22
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
200,387
 
 
5.6
 
$
9.71
 
 
Unvested Options Outstanding
 
 
 
 
 
Weighted
average
remaining life
 
Weighted
average
 
Range of exercise price
 
Shares
 
(yrs)
 
exercise price
 
 
 
 
 
 
 
 
 
 
$1.71 to $2.00
 
 
 
$
 
$7.50 to $11.25
 
14,131
 
6.6
 
$
9.91
 
$15.00 to $17.50
 
 
 
$
 
 
 
 
 
 
 
 
 
 
 
 
14,131
 
6.6
 
$
9.91
 
 
The weighted average exercise price of options granted during 2013 was $2.00 with an aggregate value of $81,884.
There were no options granted in 2012.
 
Cash received from option exercises in 2013 and 2012, amounted to $-0- and $-0-, respectively. All of the shares issued out of common stock.
 
With respect to any non-qualified stock options and incentive stock options that are exercised and held for less than one year, the Company recognizes a tax benefit upon exercise in an amount equal to the tax effect of the difference between the option price and the fair market value of the common stock on the exercise date.
 
The table below summarizes the impact of outstanding stock options on the results of operations for the years ended December 31, 2013 and 2012:
 
December 31,
 
2013
 
2012
 
 
 
 
 
 
 
 
 
Stock-Based Compensation Expense:
 
 
 
 
 
 
 
Stock Options
 
$
159,272
 
$
172,233
 
Income Tax Benefit
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Decrease in Net Income
 
$
159,272
 
$
172,233
 
 
 
 
 
 
 
 
 
Decrease in Earnings Per Share:
 
 
 
 
 
 
 
Basic
 
$
0.027
 
$
0.049
 
Diluted
 
$
0.027
 
$
0.048
 
 
The Black-Scholes-Merton option pricing model was used to estimate the fair value of share-based awards under FASB ASC Topic 718. The Black-Scholes-Merton option pricing model incorporates various and highly subjective assumptions, including expected term and expected volatility. For valuation purposes, stock option awards were categorized into two groups, stock option grants to employees and stock option grants to members of the Board of Directors.
 
The expected term of options granted was estimated to be the average of the vesting term, historical exercise and forfeiture rates, and the contractual life of the option. The expected volatility at the grant date is estimated using historical stock prices based upon the expected term of the options granted. The risk-free interest rate assumption is determined using the rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued. Cash dividends have never been paid and are not anticipated to be paid in the foreseeable future. Therefore, the assumed expected dividend yield is zero.
 
The following summary table shows the assumptions used to compute the fair value of stock options granted during 2013 and 2012 and their estimated value:
 
December 31,
 
2013
 
 
2012
 
Assumptions for Black-Scholes:
 
 
 
 
 
 
 
 
Expected term in years
 
 
10.0
 
 
 
 
Volatility
 
 
128.80
%
 
 
 
Risk-free interest rate
 
 
2.81
%
 
 
 
Expected annual dividends
 
 
None
 
 
 
None
 
 
 
 
 
 
 
 
 
 
Value of options granted:
 
 
 
 
 
 
 
 
Number of options granted
 
 
45,000
 
 
 
 
Weighted average fair value/share
 
$
2.00
 
 
$
N/A
 
Fair value of options granted
 
$
81,884
 
 
$
N/A
 
 
FASB ASC Topic 718 requires pre-vesting option forfeitures at the time of grant to be estimated and periodically revised in subsequent periods if actual forfeitures differ from those estimates. Stock-based compensation expense is recorded only for those awards expected to vest using an estimated forfeiture rate based on historical pre-vesting forfeiture data.
 
Unrecognized stock-based compensation expense was approximately $89,217 as of December 31, 2013, relating to a total of 14,131 unvested stock options under the Company’s stock option plans. This stock-based compensation expense is expected to be recognized over a weighted average period of approximately 1.1 years.