Annual report pursuant to Section 13 and 15(d)

Stock Option Plans

v3.19.1
Stock Option Plans
12 Months Ended
Dec. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock Option Plans
Note 16 — Stock Option Plans
 
The Company has the following Stock Option Plans (“Plans”) that allow for the granting of both incentive stock options or ISOs, which can result in potentially favorable tax treatment to the participant, and non-statutory stock options. The Company’s 2014 Equity Incentive Plan (the “2014 Plan”) was approved by the stockholders of the Company on June 26, 2014. The Company no longer
issues
 
any options under
its prior
2007 and 2009 Plans. The 2014 Plan has an “evergreen provision”, under which the maximum number of shares of common stock that may be issued under the 2014 Plan was initially 1,000,000 and automatically increases each time the Company issues additional shares of common stock so that, initially, the total number of shares issuable thereunder at all times would be equal to 10% of the then outstanding shares of common stock. On June 13, 2018, the Company’s stockholders approved an amendment to the Company’s 2014 Equity Incentive Plan to increase the number of shares available for issuance thereunder to 20% of the outstanding shares of common stock. As of December 31, 2018, the authorized shares of common stock under the 2014 Plan, as amended, totaled 5,518,334
. The Board of Directors of the Company agreed by resolution not to increase this number prior to June 1, 2019.
 
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.
 
Under the 2014 Plan, the Company may grant stock options, stock appreciation rights, performance awards of stock and/or cash, and stock awards of restricted stock.
 
Options outstanding under the Stock Options Plans are as follows:
 
   
2007
Plan
   
2009
Plan
   
2014
Plan
   
Total
 
Outstanding as of December 31, 2016     21,977       132,771       929,550       1,084,298  
Available for future issuance under plan                 1,027,375       1,027,375  
Total authorized by plan     21,977       132,771       1,956,925       2,111,673  
                                 
Outstanding as of December 31, 2017     10,665       117,094       1,382,485       1,510,244  
Available for future issuance under plan                 1,045,143       1,045,143  
Totals authorized by plan     10,665       117,094       2,427,628       2,555,387  
                                 
Outstanding as of December 31, 2018           110,771       1,435,750       1,546,521  
Available for future issuance under plan                 4,082,584       4,082,584  
Totals authorized by plan           110,771       5,518,334       5,629,105  
 
The 2014 Plan gives the Board of Directors of the Company the ability to determine vesting periods for all stock incentives granted under the 2014 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 expire ten years after the date of their grant and vest ratably, on a monthly basis, over the next 12 months. Non-employee directors generally have vesting on a monthly basis, over the next 12 months. Advisors or consultants can have vesting range
from 100% 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, 2018, 2017 and 2016:
 
         
Weighted
   
Weighted
Average
 
   
Number of
Options
   
Average
Exercise Price
   
Remaining Life
(years)
 
                   
Outstanding at December 31, 2015     1,022,789     $ 4.59       7.56  
Granted     116,750       6.60          
Exercised     (10,450 )     3.46          
Expired or Forfeited     (44,791 )     3.87          
Outstanding at December 31, 2016     1,084,298     $ 4.76       7.57  
 
 
 
 
 
 
 
 
 
 
 
 
 
Granted     534,500       5.74          
Exercised     (63,187 )     2.89          
Expired or Forfeited     (45,367 )     8.30          
Outstanding at December 31, 2017     1,510,244     $ 5.04       7.58  
 
 
 
 
 
 
 
 
 
 
 
 
 
Granted     330,500       5.81          
Exercised     (97,264 )     4.96          
Expired or Forfeited     (196,959 )     6.11          
Outstanding at December 31, 2018     1,546,521     $ 5.11       7.19  
 
As of December 31, 2018, there were 936,406 options that were fully vested and exercisable at a weighted average exercise price of $4.66 per share. The weighted average remaining contractual term on the vested options is 6.1 years. The unvested balance of 610,115 options as of December 31, 2018 were exercisable at a weighted average exercise price of $5.80 per share. The weighted average remaining contractual term on the vested options was 8.9 years.
 
As of December 31, 2017, there were 797,861 options that were fully vested and exercisable at a weighted average exercise price of $4.65 per share. The weighted average remaining contractual term on the vested options is 6.4 years. The unvested balance of 712,383 options as of December 31, 2017 are exercisable at a weighted average exercise price of $5.48 per share. The weighted average remaining contractual term on the unvested options is 8.7 years.
 
As of December 31, 2016, there were 613,665 options that were fully vested and exercisable at weighted average exercise price of $4.83 per share. The weighted average remaining contractual term on the vested options was 7.0 years. The unvested balance of 470,633 options as of December 31, 2016 were exercisable at a weighted average exercise price of $4.67 per share. The weighted average remaining contractual term on the vested options was 8.4 years.
 
The aggregate intrinsic value of the options outstanding as of December 31, 2018, 2017 and 2016 was approximately $912,360, $2,323,312 and $2,776,068, respectively.
 
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 share price 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 share price 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. We have never paid cash dividends on our common stock and do not anticipate paying cash dividends on our common stock 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 2018, 2017 and 2016 and their estimated value:
 
December 31,
 
2018
   
2017
   
2016
 
Assumptions for Black-Scholes:
                       
Expected term in years    
6.4 to 6.6
     
6.5 to 6.8
      7.9  
Volatility    
108.9% to 119.4%
     
122.8% to 133.0%
     
103.6% to 109.7%
 
Risk-free interest rate    
2.95% to 3.08%
     
1.98% to 2.30%
     
1.27% to 1.68%
 
Expected annual dividends    
None
     
None
     
None
 
                         
Value of options granted:
                       
Number of options granted     330,500       534,500       116,750  
Weighted average fair value per share   $ 5.01     $ 5.24     $ 5.73  
Fair value of options granted   $ 1,655,390     $ 2,803,329     $ 669,435  
 
Under FASB ASC Topic 718, the Company has elected to account for forfeitures as they occur. 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 $3,041,544 as of December 31, 2018, relating to a total of 610,115 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 2.9 years.