Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

v3.5.0.2
Stock-Based Compensation
9 Months Ended
Sep. 30, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation
Stock-Based Compensation

We have two equity incentive plans: the 2008 Stock Option Plan (the “2008 Plan”) and the 2011 Equity Incentive Plan (the “2011 Plan”, and together with the 2008 Plan, the “Stock Option Plans”). The Stock Option Plans are meant to provide additional incentive to officers, employees and consultants to remain in our employment. Options granted are generally exercisable for up to 10 years. On October 11, 2016, the stockholders voted to amend the 2011 Plan and increase the number of shares reserved by the 2011 Plan to 3,150,000 shares of common stock.

At September 30, 2016, 686,897 shares remain available for future awards under the 2011 Plan (not including the effects of the October 11, 2016 amendment to the 2011 Plan) and 112,055 shares remain available for future awards under the 2008 Plan. As of September 30, 2016, no stock appreciation rights and 275,500 shares of restricted stock have been awarded under the Stock Option Plans.

A summary of employee and non-employee stock option activity for the nine months ended September 30, 2016 is as follows:
 
Options Outstanding
 
Weighted-
Average
Remaining
Contractual
Term (in years)
 
Aggregate
Intrinsic
Value
(in thousands)
 
Number of
Shares
(in thousands)
 
Weighted-
Average
Exercise
Price
 
Outstanding January 1, 2016
1,961

 
$
10.55

 
7.68
 
$

Granted
304

 
2.01

 
 
 
 
Cancelled or expired
(137
)
 
8.78

 
 
 
 
Outstanding September 30, 2016
2,128

 
$
9.44

 
7.18
 
$

Exercisable September 30, 2016
1,250

 
$
10.35

 
6.24
 
$



In October 2016, the Company granted employees incentive stock options to purchase 43,000 shares of the Company’s common stock at a weighted-average exercise price of $1.70 per share.

On October 11, 2016 the Company granted its non-employee directors 2,500 restricted shares each of the Company’s common stock and options to purchase an aggregate of 10,000 shares each of the Company’s common stock as compensation for serving on the Board of Directors.

Aggregate intrinsic value represents the difference between the estimated fair value of our common stock and the exercise price of outstanding, in-the-money options.

As of September 30, 2016, total unrecognized compensation cost related to non-vested stock options granted to employees was $3,346,608 which we expect to recognize over the next 2.47 years.

As of September 30, 2016, total unrecognized compensation cost related to non-vested stock options granted to non-employees was $35,625 which we expect to recognize over the next 1.25 years. The estimate of unrecognized non-employee compensation is based on the fair value of the non-vested options as of September 30, 2016.

The fair value of options granted to employees is estimated on the grant date using the Black-Scholes option valuation model. This valuation model requires us to make assumptions and judgments about the variables used in the calculation, including the expected term (the period of time that the options granted are expected to be outstanding), the volatility of our common stock, a risk-free interest rate, and expected dividends. To the extent actual forfeitures differ from the estimates, the difference will be recorded as a cumulative adjustment in the period estimates are revised. No compensation cost is recorded for options that do not vest. We use the simplified calculation of expected life described in the SEC’s Staff Accounting Bulletin No. 107, Share-Based Payment, and volatility is based on an average of the historical volatilities of the common stock of three entities with characteristics similar to those of the Company. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. We use an expected dividend yield of zero, as we do not anticipate paying any dividends in the foreseeable future. Expected forfeitures are assumed to be zero due to the small number of plan participants and the plan design which has monthly vesting after an initial cliff vesting period.

The following table presents the weighted-average assumptions used to estimate the fair value of options granted to employees during the periods presented:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Volatility
74.30
%
 
55.71
%
 
74.30
%
 
61.16
%
Risk free interest rate
1.17
%
 
1.63
%
 
1.17
%
 
1.65
%
Dividend yield
0.00
%
 
0.00
%
 
0.00
%
 
0.00
%
Term (years)
5.92

 
6.16

 
5.92

 
6.15

Weighted-average fair value of options granted during the period
1.30

 
5.41

 
1.30

 
5.65



In May 2014, we issued 200,000 options to our Director, Raju Chaganti, with an exercise price of $15.89. See Note 12 for additional information. The following table presents the weighted-average assumptions used to estimate the fair value of options reaching their measurement date for non-employees during the periods presented:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Volatility
72.97
%
 
69.56
%
 
74.50
%
 
69.97
%
Risk free interest rate
1.46
%
 
2.02
%
 
1.43
%
 
2.11
%
Dividend yield
0.00
%
 
0.00
%
 
0.00
%
 
0.00
%
Term (years)
7.64

 
8.58

 
7.89

 
8.84



Restricted stock awards have been granted to employees, directors and consultants as compensation for services. At September 30, 2016, there was $444,329 of unrecognized compensation cost related to non-vested restricted stock granted to employees; we expect to recognize the cost over 1.95 years.

The following table summarizes the activities for our non-vested restricted stock awards for the nine months ended September 30, 2016:
 
Non-vested Restricted Stock Awards
 
Number of
Shares
(in thousands)
 
Weighted-Average Grant Date Fair Value
Non-vested at January 1, 2016
121

 
$
8.25

Vested
(46
)
 
9.43

Cancelled
(2
)
 
$
9.02

Non-vested at September 30, 2016
73

 
$
7.49



The following table presents the effects of stock-based compensation related to stock option and restricted stock awards to employees and non-employees on our Consolidated Statements of Operations during the periods presented (in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Cost of revenues
$
83

 
$
59

 
$
219

 
$
163

Research and development
45

 
93

 
140

 
316

General and administrative
356

 
530

 
1,095

 
1,586

Sales and marketing
30

 
42

 
84

 
113

Total stock-based compensation
$
514

 
$
724

 
$
1,538

 
$
2,178