Annual report pursuant to Section 13 and 15(d)

Stock-based Plans and Stock-based Compensation

v3.7.0.1
Stock-based Plans and Stock-based Compensation
12 Months Ended
Dec. 31, 2016
Stock-based Plans and Stock-based Compensation [Abstract]  
Stock-based Plans and Stock-based Compensation

7. Stock-based Plans and Stock-based Compensation



Stock-based Plans



We have the 2010 Incentive Stock Option Plan and the 2013 Incentive Stock Option Plan under which we have granted stock options to our directors, officers and employees. At December 31, 2016,  5,757,880 shares were authorized under the plans and 327,135 shares were available for future grant.



We believe that such awards better align the interests of our directors, officers and employees with those of our shareholders. Option awards are generally granted with an exercise price that equals the fair market value of our stock at the date of grant. These option awards generally vest based on four years of continuous service and have five-year or 10-year contractual terms.



The following table summarizes stock option activity under our stock-based plans as of and for the years ended December 31, 2016 and 2015:



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

Weighted
Average
Exercise Price

 

Weighted
Average
Remaining
Contractual
Term (Years)

 

Aggregate
Intrinsic Value

Outstanding at December 31, 2014

 

 

5,382,923 

 

$

1.76 

 

 

8.10 

 

$

35,425 

Granted

 

 

3,348,000 

 

$

1.05 

 

 

 -

 

$

 -

Exercised

 

 

 -

 

$

 -

 

 

 -

 

$

 -

Forfeit/canceled

 

 

(2,511,522)

 

$

1.60 

 

 

 -

 

$

 -

Expired

 

 

(1,176,173)

 

$

1.82 

 

 

 -

 

$

 -

Outstanding at December 31, 2015

 

 

5,043,228 

 

$

1.37 

 

 

8.12 

 

$

209,690 

Granted

 

 

1,771,500 

 

$

0.72 

 

 

 -

 

$

 -

Exercised

 

 

 -

 

$

 -

 

 

 -

 

$

 -

Forfeit/canceled

 

 

(577,817)

 

$

1.01 

 

 

 -

 

$

 -

Expired

 

 

(479,031)

 

$

1.73 

 

 

 -

 

$

 -

Outstanding at December 31, 2016

 

 

5,757,880 

 

$

1.16 

 

 

8.10 

 

$

434,630 



 

 

 

 

 

 

 

 

 

 

 

 

Expected to vest at December 31, 2016

 

 

5,757,880 

 

$

1.17 

 

 

7.16 

 

$

70,594 

Exercisable at December 31, 2016

 

 

2,394,332 

 

$

1.52 

 

 

7.15 

 

$

 -

Unrecognized expense at December 31, 2016

 

$

2,505,275 

 

 

 

 

 

 

 

 

 



The aggregate intrinsic value of options was calculated as the difference between the exercise price of the underlying awards and the quoted price of our common stock. At December 31, 2016, options to purchase 2,499,500 shares of common stock were in-the-money.



The weighted average grant-date fair value of options granted during the years 2016 and 2015 was $0.61 and $0.93, respectively.



2015



On January 1, 2015, the Company granted one employee 15,000 options to purchase shares of the Company common stock at the closing price as of January 1, 2015 of $1.19 per share.  The options vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until January 1, 2025. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $1.07 was $16,050.



On January 22, 2015, the Company granted one employee 900,000 options to purchase shares of the Company common stock at the closing price as of January 22, 2015 of $1.28 per share.  The options vest in forty-eight equal monthly installments following the grant date and are exercisable until January 22, 2025. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $1.15 was $1,035,000.



On January 22, 2015, the Company granted three employees 471,500 options to purchase shares of the Company common stock at the closing price as of January 22, 2015 of $1.28 per share.  The options vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until January 22, 2025. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $1.15 was $542,225.



On February 11, 2015, the Company granted one employee 3,000 options to purchase shares of the Company common stock at the closing price as of February 11, 2015 of $1.20 per share.  The options vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until February 11, 2025. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $1.08 was $3,240.



On February 16, 2015, the Company granted one employee 300,000 options to purchase shares of the Company common stock at the closing price as of February 16, 2015 of $1.30 per share.  The options vest in forty-eight equal monthly installments following the grant date and are exercisable until February 16, 2025. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $1.17 was $351,000.



On March 2, 2015, the Company granted one employee 100,000 options to purchase shares of the Company common stock at the closing price as of March 2, 2015 of $1.20 per share.  The options vest in forty-eight equal monthly installments following the grant date and are exercisable until March 2, 2025. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $1.08 was $108,000.



On April 16, 2015, the Company granted five employees 445,000 options to purchase shares of the Company common stock at the closing price as of April 16, 2015 of $1.20 per share. The options vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until April 16, 2025. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $1.08 was $480,600.



On April 27, 2015, the Company granted one employee 20,000 options to purchase shares of the Company common stock at the closing price as of April 27, 2015 of $1.10 per share. The options vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until April 27, 2025. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $0.99 was $19,800.



On May 4, 2015, the Company granted two employees 25,000 options to purchase shares of the Company common stock at the closing price as of May 4, 2015 of $1.00 per share. The options vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until May 4, 2025. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $0.90 was $22,500.



On May 13, 2015, the Company granted one employee 20,000 options to purchase shares of the Company common stock at the closing price as of May 13, 2015 of $0.99 per share. The options vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until May13, 2025. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $0.89 was $17,800.



On June 1, 2015, the Company granted one employee 2,000 options to purchase shares of the Company common stock at the closing price as of June 1, 2015 of $0.85 per share. The options vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until June 1, 2025. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $0.77 was $1,540.



On August 20, 2015, the Company granted three employees 400,000 options to purchase shares of the Company common stock at the closing price as of August 20, 2015 of $0.75 per share. The options vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until August 20, 2025. The total estimated value using the Black-Scholes Model, based on a volatility rate of 132% and a call option value of $0.67 was $268,000.



On October 16, 2015, the Company granted 18 employees 514,000 options to purchase shares of the Company common stock at the closing price as of October 16, 2015 of $0.48 per share. The options vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until October 16, 2025. The total estimated value using the Black-Scholes Model, based on a volatility rate of 116% and a call option value of $0.36 was $185,040.



On November 19, 2015, the Company granted four employees 132,500 options to purchase shares of the Company common stock at the closing price as of November 19, 2015 of $0.41 per share. The options vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until November 19, 2025. The total estimated value using the Black-Scholes Model, based on a volatility rate of 116% and a call option value of $0.31 was $41,075.



2016



On January 15, 2016, the Company granted four employees 167,500 options to purchase shares of the Company common stock at the closing price as of January 15, 2016 of $0.70 per share. The options vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until January 15, 2026. The total estimated value using the Black-Scholes Model, based on a volatility rate of 114% and a call option value of $0.59 was $98,825.  

 

On January 19, 2016, the Company granted one employee 500,000 options to purchase shares of the Company common stock at the closing price as of January 19, 2016 of $0.70 per share. The options vest 300,000 in equal monthly installments over 48 months, 100,000 upon a four-year cliff or $13 million in annual reported revenue, whichever is earlier to occur, and 100,000 upon a four-year cliff or $22 million in annual reported revenue, whichever is earlier to occur and are exercisable until January 15, 2026. The total estimated value using the Black-Scholes Model, based on a volatility rate of 114% and a call option value of $0.59 was $295,000.  

 

On March 24, 2016, the Company granted nine employees 258,000 options to purchase shares of the Company common stock at the closing price as of March 24, 2016 of $0.70 per share. The options vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until March 24, 2026. The total estimated value using the Black-Scholes Model, based on a volatility rate of 114% and a call option value of $0.59 was $152,220.  

 

On August 23, 2016, the Company granted four employees 695,000 options to purchase shares of the Company common stock at the closing price as of August 23, 2016 of $0.75 per share. The options vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until August 23, 2026. The total estimated value using the Black-Scholes Model, based on a volatility rate of 114% and a call option value of $0.63 was $440,573.  



On November 17, 2016, the Company granted three employees 150,000 options to purchase shares of the Company common stock at the closing price as of November 17, 2016 of $0.70 per share. The options vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter and are exercisable until November 17, 2026. The total estimated value using the Black-Scholes Model, based on a volatility rate of 114% and a call option value of $0.59 was $89,048.



Stock-based Compensation Expense



The impact on our results of operations of recording stock-based compensation expense for the years ended December 31, 2016 and 2015 was as follows:







 

 

 

 

 

 



 

 

 

 

 

 

 

 

Years ended December 31,

 

 

2016

 

2015

General and administrative

 

$

953,206 

 

$

821,410 

Sales and marketing

 

 

361,704 

 

 

229,698 

Engineering, research, and development

 

 

146,968 

 

 

112,447 

 

 

$

1,461,878 

 

$

1,163,555 



As of December 31, 2016, there was approximately $2,505,275 of unearned stock-based compensation that will be expensed from 2016 through 2021. If there are any modifications or cancellations of the underlying unvested awards, we may be required to accelerate, increase or cancel all or a portion of the remaining unearned stock-based compensation expense. Future unearned stock-based compensation will increase to the extent we grant additional equity awards.



Stock Option Valuation Assumptions



We calculated the fair value of each stock option award on the date of grant using the Black-Scholes option pricing model. The ranges of assumptions were used for the years ended December 31, 2016 and 2015:







 

 

 

 



 

 

 

 

 

 

Years ended December 31,

 

 

2016

 

2015

Risk-free interest rate

 

1.23% to 1.84%

 

1.48% to 1.85%

Expected life (years)

 

6.00 

 

3.02 to 6.08

Dividend yield

 

 -

 

 -

Expected volatility

 

113.97% to 114.55%

 

114.5% to 132.0%



The risk-free interest rate assumption is based upon published interest rates appropriate for the expected life of our employee stock options.



The expected life of the stock options represents the weighted-average period that the stock options are expected to remain outstanding and was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of its stock-based awards.



The dividend yield assumption is based on our history of not paying dividends and no future expectations of dividend payouts.



The expected volatility in 2016 and 2015 is based on the historical publicly traded price of our common stock.



Restricted stock units



The following table summarizes restricted stock unit activity under our stock-based plans as of and for the years ended December 31, 2016 and 2015:



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

Weighted
Average
Grant Date
Fair Value

 

Weighted
Average
Remaining
Contractual
Term (Years)

 

Aggregate
Intrinsic Value

Outstanding at December 31, 2014

 

 

591,436 

 

$

0.75 

 

 

0.89 

 

$

305,572 

Awarded

 

 

82,501 

 

$

0.29 

 

 

 -

 

$

 -

Released

 

 

(20,000)

 

$

1.18 

 

 

 -

 

$

 -

Forfeit

 

 

 -

 

$

 -

 

 

 -

 

$

 -

Outstanding at December 31, 2015

 

 

653,937 

 

$

0.32 

 

 

0.08 

 

$

305,572 

Awarded

 

 

340,480 

 

$

0.72 

 

 

0.70 

 

$

 -

Released

 

 

 -

 

$

 -

 

 

 -

 

$

 -

Forfeit

 

 

 -

 

$

 -

 

 

 -

 

$

 -

Outstanding at December 31, 2016

 

 

994,417 

 

$

0.72 

 

 

0.70 

 

$

731,845 

Expected to vest at December 31, 2016

 

 

994,417 

 

$

0.72 

 

 

 

 

 

 

Unrecognized expense at December 31, 2016

 

$

143,963 

 

 

 

 

 

 

 

 

 



2015



On January 22, 2015 the Company granted three independent directors a total of 62,501 restricted stock units.  The units were valued based on the closing stock price on the date of grant. All units vest equally in 12 monthly installments beginning January 31, 2015. The shares of Common Stock associated with the Restricted Stock Unit evidenced by this Agreement will be issued to the director upon the earliest to occur of (A) January 22, 2018, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.



On February 10, 2015 the Company granted an employee 20,000 restricted stock units in accordance with a separation agreement. The units were valued based on the closing stock price on the date of grant. All units vest equally in 6 monthly installments beginning on the grant date. The shares of Common Stock associated with the Restricted Stock Unit evidenced by this Agreement were issued on August 14, 2015 in accordance with the agreement.



2016 

 

On April 1, 2016 the Company granted five independent directors a total of 116,070 restricted stock units.  The units were valued based on the closing stock price on the date of grant. All units vest equally in 12 monthly installments beginning April 1, 2016. The shares of Common Stock associated with the Restricted Stock Unit evidenced by this Agreement will be issued to the director upon the earliest to occur of (A) April 1, 2019, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.

 

On August 23, 2016 the Company granted five independent directors a total of 108,335 restricted stock units.  The units were valued based on the closing stock price on the date of grant. All units vest equally in 12 monthly installments beginning August 23, 2016. The shares of Common Stock associated with the Restricted Stock Unit evidenced by this Agreement will be issued to the director upon the earliest to occur of (A) August 23, 2019, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.



On November 17, 2016 the Company granted five independent directors a total of 116,075 restricted stock units.  The units were valued based on the closing stock price on the date of grant. All units vest equally in 12 monthly installments beginning November 17, 2016. The shares of Common Stock associated with the Restricted Stock Unit evidenced by this Agreement will be issued to the director upon the earliest to occur of (A) November 17, 2019, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.



Restricted Stock Unit Compensation Expense



The impact on our results of operations of recording stock-based compensation expense for years ended December 31, 2016 and 2015 was as follows:











 

 

 

 

 

 

 

 

Years ended December 31,

 

 

 

 

 

 

 



 

2016

 

2015

General and administrative

 

$

137,291 

 

$

496,278 



 

$

137,291 

 

$

496,278