Note 13 - Stock-based Compensation

12 Months Ended

Dec. 31, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

13. Stock-based Compensation

The Company measures stock-based compensation expense for all stock-based compensation awards based on the grant-date fair value and recognizes the cost in the financial statements over the employee requisite service period.

The following table summarizes the consolidated stock-based compensation expense, by type of awards for the years ended December 31 (in thousands):

	For the Years Ended
	December 31, 2012		December 31, 2011 As Recast (1)
Employee stock options	$	349	$	269
Restricted stock grants		106		192
Total stock-based compensation expense	$	455	$	461

The following table summarizes the consolidated stock-based compensation by line items for the years ended December 31 (in thousands):

	For the Years Ended
	December 31, 2012		December 31, 2011 As Recast (1)
General and administrative	$	394	$	425
Sales, marketing and customer service		57		29
Engineering, design and product management		4		7
Total stock-based compensation expense		455		461
Tax effect on stock-based compensation expense		—		—
Total stock-based compensation expense after income taxes	$	455	$	461

As stock-based compensation expense recognized in the consolidated statements of operations is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. Forfeitures are required to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Determining Fair Value

Valuation and Amortization Method — The Company estimates the fair value of service-based and performance-based stock options granted using the Black-Scholes option-pricing formula. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. In the case of performance-based stock options, amortization does not begin until it is determined that meeting the performance criteria is probable. Service-based and performance-based options typically have a five year life from date of grant and vesting periods of three to four years.

Expected Term — The Company’s expected term represents the period that the Company’s stock-based awards are expected to be outstanding. For awards granted subject only to service vesting requirements, the Company utilizes the simplified method for estimating the expected term of the stock-based award, instead of historical exercise data. For its performance-based awards, the Company has determined the expected term life to be 5 years based on contractual life and the seniority of the recipient.

Expected Volatility —The Company uses historical volatility of the price of its common shares to calculate the volatility for its granted options.

Expected Dividend — The Company has never paid dividends on its common shares and currently does not intend to do so, and accordingly, the dividend yield percentage is zero for all periods.

Risk-Free Interest Rate — The Company bases the risk-free interest rate used in the Black-Scholes valuation model upon the implied yield curve currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term used as the assumption in the model.

Assumptions used in the determination of the fair value of share-based payment awards using the Black-Scholes model for stock option grants during the years ended December 31 were as follows:

	For the Years Ended
	December 31, 2012			December 31, 2011 As Recast (1)
Expected term		3.75		3.00	-	3.75
Risk-free interest rate	.60%	-	.89%	0.9%	-	1.52%
Expected volatility	101%	-	103%	132	-	204%
Expected dividend yield		0%			0%

(1) As recast to reflect the activity of SGT beginning January 1, 2011 combined with the balances of Solar Power, Inc. beginning March 31, 2011, as required under the accounting guidelines for a transfer of an entity under common control (refer to Note 5 —Acquisition of Solar Green Technology ).

Equity Incentive Plan

On November 15, 2006, subject to approval of the stockholders, the Company adopted the 2006 Equity Incentive Plan (the “Plan”) which permits the Company to grant stock options to directors, officers or employees of the Company or others to purchase shares of common stock of the Company through awards of incentive and nonqualified stock options (“Option”), stock (“Restricted Stock” or “Unrestricted Stock”) and stock appreciation rights (“SARs”). The Plan was approved by the stockholders on February 7, 2007.

The Company currently has time-based options outstanding. The time-based options generally vest 25% annually and expire three to five years from the date of grant. The restricted shares were fully vested as of December 31, 2012. Total number of shares reserved and available for grant and issuance pursuant to this Plan is equal to nine percent (9%) of the number of outstanding shares of the Company. Not more than 2,000,000 shares of stock shall be granted in the form of incentive stock options. Shares issued under the Plan will be drawn from authorized and unissued shares or shares now held or subsequently acquired by the Company. Outstanding shares of the Company shall, for purposes of such calculation, include the number of shares of stock into which other securities or instruments issued by the Company are currently convertible (e.g. convertible preferred stock, convertible debentures, or warrants for common stock), but not outstanding options to acquire stock. At December 31, 2012 there were 11,565,606 shares available for grant under the plan (9% of the outstanding shares of 198,214,456 plus outstanding warrants of 300,000 less options outstanding and exercises since inception).

The exercise price of any Option will be determined by the Company when the Option is granted and may not be less than 100% of the fair market value of the shares on the date of grant, and the exercise price of any incentive stock option granted to a stockholder with a 10% or greater shareholding will not be less than 110% of the fair market value of the shares on the date of grant. The exercise price per share of a SAR will be determined by the Company at the time of grant, but will in no event be less than the fair market value of a share of Company’s stock on the date of grant.

The following table summarizes the Company’s stock option activities:

	Shares	Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value ($000)
Outstanding as of January 1, 2011 (1)	—	$	—
Acquired in a transfer of an entity under common control (1)	2,505,175		0.92
Granted	4,890,000		0.44
Exercised	—		—
Forfeited	(2,223,675)		0.71
Outstanding as of December 31, 2011	5,171,500	$	0.56
Granted	2,620,000		0.33
Exercised	—		—
Forfeited	(1,955,000)		0.57
Outstanding as of December 31, 2012	5,836,500	$	0.45	3.50	$	-
Vested and exercisable as of December 31, 2012	1,609,500	$	0.64	2.65	$	-

(1) As recast to reflect the activity of SGT beginning January 1, 2011 combined with the balances of Solar Power, Inc. beginning March 31, 2011, as required under the accounting guidelines for a transfer of an entity under common control (refer to Note 5—Acquisition of Solar Green Technology ).  

The following table presents the exercise price and remaining life information about options exercisable at December 31, 2012:

Range of exercise price			Shares Exercisable		Weighted average remaining contractual life		Weighted average exercise price		Aggregate Intrinsic (000s)
$1.24	-	$1.30		413,500		0.54	$	1.26	$	-
$0.70	-	$1.23		93,000		1.20		0.74		-
$0.23	-	$0.69		1,103,000		3.10		0.40		-
				1,609,500		2.65	$	0.64	$	-

Changes in the Company’s non-vested stock awards are summarized as follows:

	Time-based Options					Restricted Stock
	Shares			Weighted Average Exercise Price Per Share		Shares			Weighted Average Grant Date Fair Value Per Share
Non-vested as of January 1, 2011 (1)		-		$	-		-		$	-
Acquired in a transfer of an entity under common control (1)		1,334,125			1.34		-			-
Granted		4,890,000			0.44		400,000			0.48
Vested		(429,125	)		0.86		(400,000	)		0.48
Forfeited		(1,470,000	)		0.52		-			-
Non-vested as of December 31, 2011		4,325,000		$	0.41		-			-
Granted		2,620,000			0.33		400,000			0.27
Vested		(1,187,875	)		0.51		(400,000	)		0.27
Forfeited		(1,530,125	)		0.47		-			-
Non-vested as of December 31, 2012		4,227,000		$	0.38		-		$	-

(1) As recast to reflect the activity of SGT beginning January 1, 2011 combined with the balances of Solar Power, Inc. beginning March 31, 2011, as required under the accounting guidelines for a transfer of an entity under common control (refer to Note 5—Acquisition of Solar Green Technology).

As of December 31, 2012, there was $1.6 million of unrecognized compensation cost related to non-vested option awards, which is expected to be recognized over a weighted-average of 3.8 years.

The total fair value of shares vested during the year ended December 31, 2012 and 2011 was $0.5 million and $0.4 million, respectively. There were no changes to the contractual life of any fully vested options during the years ended December 31, 2012 and 2011.There were no options exercised during the years ended December 31, 2012 or 2011.

Following is a summary of our restricted stock awards as of December 31, 2012 and 2011 and changes during the years then ended:

	Number of Shares		Weighted Average Grant-Date Fair Value
Restricted stock units at  January 1, 2011 (1)		-	$	-
Acquired in a transfer of an entity under common control (1)		525,868		1.03
Granted		400,000		0.48
Forfeited		-		-
Restricted stock units at  December 31, 2011		925,868		0.79
Granted		400,000		0.27
Forfeited		-		-
Restricted stock units at  December 31, 2012		1,325,868	$	0.63

(1) As recast to reflect the activity of SGT beginning January 1, 2011 combined with the balances of Solar Power, Inc. beginning March 31, 2011, as required under the accounting guidelines for a transfer of an entity under common control (refer to Note 5 —Acquisition of Solar Green Technology ).