7.	STOCK BASED COMPENSATION

 

Options to directors, officers and employees

 

The Company maintains, as adopted by the board of directors, the 2014 Stock Incentive Plan, the 2014 Stock Compensation Plan, 2013 Incentive Stock Plan, the 2012 Incentive Stock Plan, the 2011 Incentive Stock Plan and the 2010 Stock Incentive Plan (the plans) providing for the issuance of up to 1,100,000 options to employees, officers, directors or consultants of the Company.  Incentive stock options granted under the plans may only be granted with an exercise price of not less than fair market value of the Company’s common stock on the date of grant (110% of fair market value for incentive stock options granted to principal stockholders).  Non-qualified stock options granted under the plans may only be granted with an exercise price of not less than 85% of the fair market value of the Company’s common stock on the date of grant.  Awards under the plans may be either vested or unvested options.  The unvested options vest ratably over two years for options with a five or three-year term and after one year for options with a two-year term.

 

In addition to the plans, the Company has granted, on various dates, stock options to directors, officers and employees to purchase common stock of the Company.  The terms, exercise prices and vesting of these awards vary. 

 

The following table summarizes option activity for directors, officers and employees : 

 

							Outstanding Stock Options
			Shares Available for Grant				Number of Shares				Weighted Average Exercise Price per Share				Weighted Average Grant Date Fair Value  per Share				Weighted Average Remaining Exercise Term in Months
	Balance, December 31, 2014			80,907				1,667,068			$	2.34			$	1.52				41
	Additional stock reserved			1,120,000				-			$	-			$	-				-
	Granted			(443,436	)			443,436			$	1.93			$	1.29				55
	Exercised			-				(130,070	)		$	1.30			$	0.75				-
	Forfeited			-				-			$	-			$	-				-
	Expired			-				-			$	-			$	-				-
	Balance December 31, 2015			757,471				1,980,434			$	2.21			$	1.46				49
	Additional stock reserved			500,000				-			$	-			$	-				-
	Granted			(794,500	)			794,500			$	6.38			$	2.82				58
	Exercised			-				(138,113	)		$	1.79			$	0.49				-
	Forfeited			-				-			$	-			$	-				-
	Expired			-				492,500			$	3.83			$	1.65				-
	Balance December 31, 2016			462,971				3,129,321			$	2.46			$	1.53				43

 

The Company recorded $768,196 and $298,044 compensation expense for stock options to directors, officers and employees for the years ended December 31, 2016 and 2015 respectively.  As of December 31, 2016, unrecognized compensation expense of $2,622,748 is related to non-vested options granted to directors, officers and employees which is anticipated to be recognized over the next 46 months, commensurate with the vesting schedules.

Options to consultants

 

The Company has also granted, on various dates, stock options to purchase common stock of the Company to consultants for services previously provided to the Company.  The terms, exercise prices and vesting of these awards vary. 

  

The following table summarizes option activity for consultants :

 

							Outstanding Stock Options
			Shares Available for Grant				Number of Shares				Weighted Average Exercise Price per Share				Weighted Average Grant Date Fair Value  per Share				Weighted Average Remaining Exercise Term in Months
	Balance, December 31, 2014			39,327				399,273			$	1.27			$	1.31				50
	Additional stock reserved			-				-			$	-			$	-				-
	Granted			-				-			$	-			$	-				-
	Exercised			-				(32,524	)		$	0.10			$	0.98				-
	Forfeited			59,976				(59,976	)		$	-			$	-				-
	Expired			-				-			$	-			$	-				-
	Balance December 31, 2015			99,303				306,773			$	0.36			$	1.01				41
	Additional stock reserved			-				-			$	-			$	-				-
	Granted			(9,000	)			9,000			$	4.99			$	0.44				52
	Exercised			-				(138,312	)		$	0.34			$	0.81				-
	Forfeited			-				-			$	-			$	-				-
	Expired			-				-			$	-			$	-				-
	Balance December 31, 2016			90,303				177,461			$	0.49			$	1.05				37

 

The Company recorded $31,356 and $71,530 compensation expense for stock options to consultants for the years ended December 31, 2016 and 2015, respectively. As of December 31, 2016, unrecognized compensation expense of $137,941 is related to non-vested options granted to consultants which is anticipated to be recognized over the next 31 months, commensurate with the vesting schedules. 

 

Warrants to placement agent and consultants

 

Through December 2011, the Company compensated the placement agent for assisting in the sale of the Company’s securities by paying the placement agent commissions and issuing the placement agent common stock purchase warrants to purchase shares of the Company’s common stock.  The warrants have a five-year term and various exercise prices.

 

The Company has also granted, on various dates, stock warrants to purchase common stock of the Company to consultants for services previously provided to the Company.  The terms, exercise prices and vesting of these awards vary.

The following table summarizes warrant activity for the placement agent and consultants :

 

							Outstanding Warrants
			Shares Available for Grant				Number of Shares				Weighted Average Exercise Price per Share				Weighted Average Grant Date Fair Value  per Share				Weighted Average Remaining Exercise Term in Months
	Balance, December 31, 2014			274,098				410,149			$	3.59			$	1.51				14
	Additional stock reserved			-				-			$	-			$	-				-
	Granted			(63,871	)			63,871			$	1.40			$	1.17				59
	Exercised			-				(161,719	)		$	2.36			$	1.09				-
	Forfeited			-				(5,478	)		$	-			$	-				-
	Expired			-				-			$	-			$	-				-
	Balance December 31, 2015			210,227				306,823			$	2.79			$	1.26				9
	Additional stock reserved			-				-			$	-			$	-				-
	Granted			-				-			$	-			$	-				-
	Exercised			-				(60,160	)		$	2.69			$	0.43				-
	Forfeited			-				-			$	-			$	-				-
	Expired			-				87,458			$	6.00			$	2.70				-
	Balance December 31, 2016			210,227				334,121			$	2.56			$	1.16				17

 

The Company recorded $0 and $32,944 compensation expense for stock warrants to the placement agent and consultants for the years ended December 31, 2016 and 2015, respectively.  There is no unrecognized compensation expense for the placement agent warrants because they are fully vested at date of grant.

 

Warrants to directors and officers

 

In December 2010 and May 2011, the Company issued to certain directors and officers common stock purchase warrants to acquire shares of common stock at an exercise price of $2.00 per share for a period of five years.  In November 2011, under the terms of a Promissory Note issued to a director and officer, common stock purchase warrants were issued to acquire 10,000 shares of common stock at an exercise price of $5.00 per share for a period of one year.  In May 2012, a director and officer received 10,000 2012 Warrants to acquire common stock of the Company at an exercise price of $5.00 for a period of three years.  In June 2012, a director and officer converted secured and unsecured loans provided to the Company from September 2011 to June 2012 in the aggregate amount of $389,250 into 2012 Notes and 2012 Warrants.  In November 2012, the Company entered into a Note and Warrant Amendment and Conversion Agreement whereby the holders and 2012 Investors converted all principal and interest under the 2012 Notes into shares of common stock.  Further, the exercise price of the 2012 Warrants was reduced to $2.50 per share.  The $7,388 cost of the reduction in the exercise price is included in stock based compensation expense for the year ended December 31, 2012.

The following table summarizes warrant activity for directors and officers :

 

							Outstanding Warrants
			Shares Available for Grant				Number of Shares				Weighted Average Exercise Price per Share				Weighted Average Grant Date Fair Value  per Share				Weighted Average Remaining Exercise Term in Months
	Balance, December 31, 2014			348,925				338,925			$	17.83			$	0.95				9
	Additional stock reserved			-				-			$	-			$	-				-
	Granted			-				-			$	-			$	-				-
	Exercised			-				-			$	-			$	-				-
	Forfeited			-				-			$	-			$	-				-
	Expired			-				-			$	-			$	-				-
	Balance December 31, 2015			348,925				338,925			$	20.00			$	1.02				4
	Additional stock reserved			-				-			$	-			$	-				-
	Granted			-				-			$	-			$	-				-
	Exercised			-				-			$	-			$	-				-
	Forfeited			-				-			$	-			$	-				-
	Expired			-				150,000			$	20.00			$	0.15				-
	Balance December 31, 2016			348,925				488,925			$	20.00			$	1.02				4

 

The Company recorded no compensation expense for stock warrants to directors and officers for the years ended December 31, 2016 and 2015, respectively.  There is no unrecognized compensation expense for these warrants because they are fully vested at date of grant.