Equity, Stock Plan and Warrants

9 Months Ended

Sep. 30, 2016

Stockholders' Equity Note [Abstract]

Equity, Stock Plan and Warrants

Note 4 —Equity, Stock Plan and Warrants

Common Stock

During the nine months ended September 30, 2016, we (1) issued 833,252 shares of common stock to directors and employees; (2) issued 1,595,000 shares related to exercise of warrants; (3) issued 6,152,500 shares and received proceeds of $8.4 million, net of issuance costs of $0.8 million.

During the nine months ended September 30, 2015, we (1) issued 12,500 shares of common stock for cash in connection with the exercise of stock options; (2) issued 105,017 shares of common stock to various directors, officers and employees as stock awards; (3) issued 20,833 shares of common stock for the settlement of the derivative lawsuit; (4) issued 430,000 shares of common stock for the settlement of the class action lawsuit; and (5) issued 6,548,225 shares of common stock to convert $8.1 million of principal and $0.3 million of interest into shares of common stock.

Restricted Stock

Total compensation expense recognized for restricted stock was approximately $1.0 million and $1.1 million for the nine months ended September 30, 2016 and September 30, 2015, respectively. The Company has recorded approximately $1.0 million, $15,000 and $15,000 of restricted stock expense in selling, general and administrative expenses, research and development expense and cost of revenue for the nine months ended September 30, 2016, respectively and approximately $0.9 million and $0.2 million of restricted stock expense in selling, general and administrative expenses and research and development expense for the nine months ended September 30, 2015, respectively.

In the nine months ended September 30, 2016 the Company granted 1,260,000 restricted stock units (“RSUs”) with a grant-date fair value of approximately $1.9 million or $1.50 per share.

RSUs are converted into shares of the Company’s common stock upon vesting on a one-for-one basis. Typically, vesting of RSUs is subject to the employee’s continuing service to the Company. RSUs generally vest over a period of three years and are expensed ratably on a straight line basis over their respective vesting period net of estimated forfeitures. The fair value of the RSUs granted is the product of the number of shares granted and the grant date fair value of the Company’s common stock. The RSUs that will vest in future periods will be net-share settled such that the Company will withhold shares with value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares to be withheld will be based on the value of the RSUs on their vesting date as determined by the Company’s closing stock price.

At September 30, 2016, there was $2.3 million of total unrecognized compensation cost related to non-vested shares of restricted stock which is expected to be recognized over a weighted-average period of 2.23 years. There were 429,938 shares of restricted stock, net that became vested during the nine months ended September 30, 2016.

Stock Incentive Plans

The Company has adopted four stock incentive plans: the 2005 Stock Incentive Plan, the 2007 Stock Incentive Plan, the 2010 Stock Incentive Plan and the 2011 Stock Incentive Plan (collectively, the “Stock Incentive Plans”). The Stock Incentive Plans allow for an aggregate of up to 5,500,001 shares of our common stock to be awarded through incentive and non-qualified stock options, stock appreciation rights, restricted stock, performance shares and other types of awards.

Our Stock Incentive Plans are administered by our Board of Directors, which has the sole discretion to select participants who will receive the awards and to determine the type, size and terms of each award granted. As of September 30, 2016, there were 482,553 shares available for issuance under the Stock Incentive Plans.

The following disclosures provide information regarding the Company’s stock-based compensation awards, all of which are classified as equity awards:

Total compensation expense recognized for options was approximately $0.4 million and $1.3 million for the nine months ended September 30, 2016 and September 30, 2015, respectively. The Company has recorded approximately $0.2 million, $0.8 million and $66,000 of stock compensation expense in selling, general and administrative expenses research and development expense and cost of revenue for the nine months ended September 30, 2016 and approximately $0.5 million, 0.8 million and $46,000 of stock compensation expense in selling, general and administrative expenses, research and development expense and cost of revenue for the nine months ended September 30, 2015.

A summary of the changes in the total stock options outstanding during the nine months ended September 30, 2016 follows:

				Weighted
				Average
	Options			Exercise Price
Outstanding and expected to vest, at December 31, 2015		1,941,194		$	6.54
Granted		418,000		$	1.39
Forfeited or expired		(156,253	)	$	9.36
Exercised		(3,050	)	$	1.23
Outstanding and expected to vest, at September 30, 2016		2,199,891		$	5.37
Vested and exercisable at September 30, 2016		1,536,078		$	7.02

The fair values of the Company’s options were estimated on the date of grant using the Black-Scholes valuation model with the following weighted-average assumptions:

	Three Months ended September 30, 2016			Three Months ended September 30, 2015			Nine Months ended September 30, 2016			Nine Months ended September 30, 2015
Expected life (years)		5 years			5 years			5 years			5 years
Interest rate		1.11	%		1.63	%		1.11 to 1.63	%		1.31 to 1.63	%
Dividend yield		—			—			—			—
Volatility		97.48	%		157.66	%		97.48 to 157.66	%		144.34 to 157.66	%
Forfeiture rate		—			—			—			—
Weighted average fair value of options granted	$	1.11		$	1.15		$	1.02		$	1.41

At September 30, 2016, there was $0.8 million of total unrecognized compensation cost related to non-vested stock option awards which is expected to be recognized over a weighted-average period of 2.01 years. There were approximately 0.5 million, net options that became vested during the nine months ended September 30, 2016.

Common Stock Warrants

As of September 30, 2016, the Company has 9,475,360 common stock warrants outstanding with a weighted average exercise price of $1.61 per share. Information regarding outstanding warrants as of September 30, 2016 is as follows:

Grant date	Warrants Outstanding		Exercisable		Weighted Exercise Price		Remaining Life (Years)
June 10, 2009		15,796		15,796	$	7.50		2.68
August 31, 2009		24,934		24,934	$	7.50		2.68
October 2, 2009		205,000		205,000	$	5.00		3.08
March 15, 2010		8,337		8,337	$	7.50		3.25
April 5, 2010		930		930	$	7.50		3.25
April 16, 2015 (1)		1,151,121		1,151,121	$	1.50		3.25
November 5, 2015 (1)		38,371		38,371	$	1.50		3.50
November 30, 2015 (1)		8,030,871		8,030,871	$	1.50		4.17
Total		9,475,360		9,475,360

(1) The exercise price of the warrants and the number of shares for which the warrants are exercisable are subject to certain adjustments if the Company issues or sells additional shares of common stock or common stock equivalents at a price per share less than the exercise price then in effect, or without consideration.