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Stock Option Plan
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Dec. 31, 2014
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| Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disclosure of Compensation Related Costs, Share-based Payments [Text Block] |
Note 10 — Stock Option Plan
On May 17, 2013, the Company adopted the 2013 Equity Incentive Plan (the “Plan”) and reserved 487,932 shares of common stock for issuance under the Plan, including stock options, stock awards and stock bonuses. The maximum number of shares that may be granted under the Plan will be increased effective the first day of each of the Company’s fiscal quarters provided that the number of shares that may be granted under the Plan does not exceed 839,983 shares. The Plan is administered by the Compensation Committee of the Company’s board of directors. The persons eligible to participate in the Plan are employees, non-employee members of the board of directors, consultants and other independent advisors who provide services to the Company. Options issued under the Plan may have a term of up to ten years and may have variable vesting.
On July 19, 2013, the Company granted 346,813 stock options to various employees to purchase shares of common stock at an exercise price of $5.00 per share. The options vest in equal installments on December 31, 2013, 2014 and 2015. During November and December 2013, the Company granted 40,500 stock options to newly hired employees. The exercise price of the stock options issued to new employees was the closing price of the Company’s stock on the date of grant and the options vest in equal annual installments over 4 years. The options granted in 2013 were valued at $1,414,330 using the Black-Scholes option pricing model. The compensation expense associated with these grants recognized during the years ended December 31, 2014 and 2013 amounted to $345,858 and $337,908, respectively.
During the year ended December 31, 2014, the Company granted 598,400 and 51,126 stock options to purchase shares of common stock to employees and non-employee directors, respectively. The exercise price of the stock options issued to both employees and directors was the closing price of the Company’s stock on the date of grant. The options granted to employees vest in equal annual installments over 4 years while the options granted to directors vested in equal quarterly installments in 2014. Of the 598,400 stock options granted to employees in 2014, 320,000 of those options (the “contingent grants”) are contingent upon shareholder approval of an increase in the shares reserved for issuance under the Plan at either the 2015 or 2016 Annual Shareholder Meeting. The options granted in 2014, inclusive of the contingent grants, were valued at $2,839,275 using the Black-Scholes option pricing model. The compensation expense associated with these grants recognized during the year ended December 31, 2014 amounted to $340,538.
At December 31, 2014 and without considering the contingent grants, 173,280 shares of common stock were available for issuance under the Plan and, once granted, no additional shares may be granted under the Plan without shareholder approval to increase the shares reserved for issuance under the Plan.
Awards Granted Outside the Plan
The Company issued a non-qualified stock option to its Chief Executive Officer (the “Inducement Option”) to purchase 250,000 shares of the Company’s common stock at a per share exercise price of $7.14, equal to the closing price of the Company’s common stock on January 8, 2014, the date of grant. The right to purchase the shares subject to the Inducement Option vest in equal increments over a period of four years, beginning on December 31, 2014 and continuing thereafter on each subsequent December 31st through the end of the vesting period. The Inducement Option has a term of 10 years and is not subject to the terms of the Company’s 2013 Equity Incentive Plan. The estimated fair value of the Inducement Option, calculated utilizing the Black-Scholes option pricing model, was $1,030,825. The compensation expense associated with this grant recognized during the year ended December 31, 2014 amounted to $257,706.
The Company issued non-qualified stock options to two former executives in connection with separation and release agreements entered into by and between the executives and the Company in the fourth quarter of 2013. The separation and release agreement for one executive included a stock option agreement whereby the executive was granted an option to purchase 36,116 shares of common stock exercisable for a period of 12 months beginning on November 27, 2014. Of the 36,116 shares of common stock covered by the option agreement, 29,399 may be purchased at a per-share price of $5.00 and 6,717 may be purchased at a per share price of $6.3276. The separation and release agreement for the other former executive included a stock option agreement whereby the executive was granted an option to purchase 33,743 shares of common stock. Of the 33,743 shares covered by the option agreement, 26,743 shares have an exercise price of $0.416675 per share and are exercisable through January 31, 2022 and 7,000 shares have an exercise price of $5.00 per share and are exercisable through November 26, 2015. The option grants were treated as a modifications of prior grants and the Company recorded a charge of $94,503 for these modifications.
As permitted by SAB 107, due to the Company’s insufficient history of option activity, management utilizes the simplified approach to estimate the expected term of stock options, which represents the period of time that options granted are expected to be outstanding. The risk free interest rate for periods within the contractual life of the option is based on the U.S. treasury yield in effect at the time of grant. The volatility is determined based on management’s estimate or historical volatilities of comparable companies. The Company has never declared or paid dividends and has no plans to do so in the foreseeable future.
The assumptions used in the Black-Scholes model are as follows:
A summary of the Company’s stock option activity and related information is as follows:
During the year ended December 31, 2014, an option holder exercised 10,500 options on a cashless basis and received 10,374 shares of common stock and 126 shares were used to cover the exercise price. The Company paid the option holder $6 for a fractional share in connection with the exercise of the options.
The following table sets forth additional information about stock options outstanding at December 31, 2014:
The estimated aggregate pretax intrinsic value (the difference between the Company’s stock price on the last day of the year ended December 31, 2014 and the exercises price, multiplied by the number of vested in-the-money options) is approximately $1,218,000. This amount changes based on the fair value of the Company’s stock.
As of December 31, 2014, there was $3,686,355 of unrecognized compensation cost related to non-vested share-based compensation arrangements. That cost is expected to be recognized over a weighted average period of 3.3 years.
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