NOTE 15 – STOCK INCENTIVE PLAN, OPTIONS AND WARRANTS

Stock Options

2005 Stock Incentive Plan

On January 5, 2006, the Company adopted the 2005 Stock Incentive Plan, which authorized the granting of a variety of stock-based incentive awards. The 2005 Stock Incentive Plan was administered by the Company’s BOD, or a committee appointed by the BOD, which determined the recipients and terms of the awards granted. The 2005 Stock Incentive Plan provided for the issuance of both incentive stock options (“ISOs”) and non-qualified stock options (“NQOs”). ISOs could only be granted to employees and NQOs could be granted to directors, officers, employees, consultants, independent contractors and advisors. The 2005 Stock Incentive Plan provided for a total of 366,667 shares of common stock to be reserved for issuance under the 2005 Stock Incentive Plan.

2013 Stock Incentive Plan

On July 24, 2013, the BOD approved and adopted the 2013 Stock Incentive Plan. The 2013 Stock Incentive Plan replaced the 2005 Stock Incentive Plan. No new grants will be granted under the 2005 Stock Incentive Plan as of July 24, 2013. Grants that were made under the 2005 Stock Incentive Plan prior to the BOD’s approval and adoption of the 2013 Stock Incentive Plan will continue to be administered in effect in accordance with their terms. The 2013 Stock Incentive Plan became effective on July 24, 2013 and, subject to the right of the BOD to amend or terminate the 2013 Stock Incentive Plan in accordance with terms and conditions thereof, will remain in effect until all shares of the Company’s common stock reserved for issuance thereunder have been delivered and any restrictions on such shares have lapsed. Notwithstanding the foregoing, no shares of the Company’s common stock may be granted under the 2013 Stock Incentive Plan on or after July 24, 2023.

On December 4, 2015, the Company filed a registration statement, whereby the 2013 Stock Incentive Plan authorizes the issuance of not more than 2,500,000 shares of the Company’s common stock.

The 2013 Stock Incentive Plan is administered by the Compensation Committee. Under the 2013 Stock Incentive Plan, the Compensation Committee is authorized to grant awards to employees, consultants and any other persons to whom the 2013 Stock Incentive Plan is applicable and to determine the number and types of such awards and the terms, conditions, vesting and other limitations applicable to each such award. The Compensation Committee has the power to interpret the 2013 Stock Incentive Plan and to adopt such rules and regulations as it considers necessary or appropriate for purposes of administering the 2013 Stock Incentive Plan.

The following types of awards or any combination of awards may be granted under the 2013 Stock Incentive Plan: (i) NQOs, (ii) stock appreciation rights, (iii) restricted stock, (iv) restricted stock units, (v) other stock-based awards, (vi) dividend equivalents and (vii) cash-based awards. The aggregate number of shares of the Company’s common stock that are reserved for awards to be granted under the 2013 Stock Incentive Plan is 2,500,000 shares, subject to adjustments for stock splits, recapitalizations and other specified events.

Stock-based Compensation Expense

The fair value of options is estimated on the date of grant using the Black-Scholes option pricing model. The valuation determined by the Black-Scholes pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The risk free rate is based on the U.S. Treasury rate for the expected life at the time of grant, volatility is based on the average long-term implied volatilities of peer companies and the expected life is based on the estimated average of the life of options using the simplified method as prescribed by ASC 718, Compensation – stock compensation. The Company utilizes the simplified method to determine the expected life of the options due to insufficient exercise activity during recent years as a basis from which to estimate future exercise patterns. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts.

In accordance with the provisions of ASU 2016‑09, the Company reduces compensation cost for actual forfeitures as they occur. Prior to the adoption to ASU 2016‑09 during the fourth quarter of 2016, the Company’s estimated forfeiture rate utilized in calculating compensation cost was zero percent based on the Company’s limited historical forfeiture experience.

The following table summarizes the Company’s stock option activity for the years ended December 31, 2018, 2017 and 2016:


				Weighted-Average
				Remaining
	Number of	Weighted-Average		Contractual Life	Aggregate
	Options	Exercise Price		(in Years)	Intrinsic Value
	(in thousands, except share and per share data)
Outstanding - January 1, 2016	129,501	$	9.65	3.3	$	148
Granted	—		—
Exercised	—		—
Forfeited or Canceled	—		—
Outstanding - January 1, 2017	129,501	$	9.65	2.3	$	—
Granted	—		—
Exercised	—		—
Forfeited or Canceled	(45,500)		(11.49)
Outstanding - January 1, 2018	84,001	$	8.65	2.1	$	—
Granted	—		—
Exercised	—		—
Forfeited or canceled	(34,500)		(6.41)
Outstanding at December 31, 2018	49,501	$	10.22	2.3	$	—
Exercisable - December 31, 2018	49,501	$	10.22	2.3	$	—

A summary of the changes in the Company’s unvested stock options is as follows:


		Weighted-Average Grant Date
	Number of Options	Fair Value
Unvested - January 1, 2016	21,000	$	2.71
Granted	—		—
Vested	(16,000)		(2.94)
Forfeited or Canceled	—		—
Unvested - January 1, 2017	5,000	$	1.96
Granted	—		—
Vested	(5,000)		(1.96)
Forfeited or Canceled	—		—
Unvested - January 1, 2018	—	$	—
Granted	—		—
Vested	—		—
Forfeited or Canceled	—		—
Unvested - December 31, 2018	—	$	—

There was no compensation expense related to stock options for the year ended December 31, 2018. Total compensation expense related to stock options for each of the years ended December 31, 2017 and 2016 was less than $0.1 million. At December 31, 2018, there is no unrecognized compensation expense related to stock options.

Warrants

The following table summarizes the Company’s outstanding warrants:


				Weighted-Average
				Remaining
	Number of	Weighted-Average		Contractual Life	Aggregate
	Warrants	Exercise Price		(in Years)	Intrinsic Value
	(in thousands, except share and per share data)
Outstanding - January 1, 2016	801,760	$	7.87	4.1	$	1,377
Granted	—		—
Exercised	—		—
Forfeited or Canceled	—		—
Outstanding - January 1, 2017	801,760	$	7.87	3.1	$	51
Granted	—		—
Exercised	—		—
Forfeited or Canceled	(31,600)		—
Outstanding - January 1, 2018	770,160	$	7.95	2.2	$	—
Granted	—		—
Exercised	—		—
Forfeited or canceled	(570,160)		6.07
Outstanding at December 31, 2018	200,000	$	13.32	6.4	$	—
Exercisable - December 31, 2018	200,000	$	13.32	6.4	$	—

A summary of the changes in the Company’s unvested warrants is as follows:


		Weighted-Average Grant Date
	Number of Warrants	Fair Value
Unvested - January 1, 2016	150,000	$	6.32
Granted	—		—
Vested	(100,000)		6.32
Forfeited or Canceled	—		—
Unvested - January 1, 2017	50,000	$	6.32
Granted	—		—
Vested	(50,000)		6.32
Forfeited or Canceled	—		—
Unvested - January 1, 2018	—	$	—
Granted	—		—
Vested	—		—
Forfeited or Canceled	—		—
Unvested - December 31, 2018	—	$	—

There was no compensation expense related to warrants for the year ended December 31, 2018. Total compensation expense related to warrants for the years ended December 31, 2017 and 2016 was less than $0.1 million and $0.2 million, respectively. At December 31, 2018 there is no unrecognized compensation expense related to warrants.

Restricted Stock

A summary of the time-based restricted stock activity for the years ended December 31, 2018, 2017 and 2016 is as follows:


				Weighted-Average
		Weighted-Average		Remaining
		Grant Date Fair		Contractual Life
	Number of Shares	Value		(in Years)

Unvested - January 1, 2016	410,653	$	8.81	1.8
Granted	80,903		5.57
Vested	(232,769)		8.08
Unvested - January 1, 2017	258,787	$	8.45	2.1
Granted	111,112		3.60
Vested	(174,363)		(6.73)
Unvested - January 1, 2018	195,536	$	7.23	1.8
Granted	235,296		1.70
Vested	(137,843)		5.25
Unvested - December 31, 2018	292,989	$	3.72	0.9

During the year ended December 31, 2018, the Company granted 235,296 shares of time-based restricted stock to members of the Company’s board of directors. These shares had a grant date fair value of $0.4 million and vest over a period of one year. The Company recorded $0.3 million during the year ended December 31, 2018 as compensation expense pertaining to these grants.

During the year ended December 31, 2017, the Company granted 111,112 shares of time-based restricted stock to members of the Company’s board of directors. These shares had a grant date fair value of $0.4 million and vest over a period of one year. The Company recorded $0.1 million and $0.3 million during the years ended December 31, 2018 and 2017, respectively, as compensation expense pertaining to these grants.

During the year ended December 31, 2016, the Company accelerated the vesting of 32,500 shares of time-based restricted stock in connection with restructuring activities. The Company recorded $0.2 million during the year ended December 31, 2016 as compensation expense pertaining to these restructuring activities.

During the year ended December 31, 2016, the Company granted (i) 70,548 shares of time-based restricted stock to members of the Company’s BOD and (ii) 10,355 shares of time-based restricted stock to a non-employee pursuant to a partnership agreement. These shares had a grant date fair value of $0.5 million and vest over a period of one to five years. The Company recorded less than $0.1 million, $0.1 million and $0.3 million during the years ended December 31, 2018, 2017 and 2016, respectively, as compensation expense pertaining to these grants.

Total compensation expense related to time-based restricted stock grants for the year ended December 31, 2018, 2017 and 2016 was $0.5 million, $0.6 million, and $1.6 million, respectively. Total unrecognized compensation expense related to time-based restricted stock grants at December 31, 2018 amounted to $0.2 million and is expected to be recognized over a weighted average period of 0.9 years.

Restricted Stock Units

A summary of the time-based restricted stock unit activity for the years ended December 31, 2018, 2017 and 2016 is as follows:


				Weighted-Average
		Weighted-Average		Remaining
		Grant Date Fair		Contractual Life
	Number of Shares	Value		(in Years)

Unvested - January 1, 2016	100,000	$	14.33	3.0
Granted	260,000		7.03
Vested	(33,333)		(14.33)
Unvested - January 1, 2017	326,667	$	8.52	2.5
Granted	688,836		3.18
Vested	(219,103)		(8.29)
Forfeited or canceled	(60,000)		(4.89)
Unvested - January 1, 2018	736,400	$	3.89	2.2
Granted	2,678,743		1.77
Vested	(1,732,523)		(2.18)
Forfeited or canceled	(66,667)		(3.20)
Unvested - December 31, 2018	1,615,953	$	2.24	2.2

During the year ended December 31, 2018, the Company granted 1,835,257 time-based restricted stock units, respectively, to certain employees and consultants for future services. These shares of time-based restricted stock units had a grant date fair value of $3.2 million and vest immediately to over a period of five years. The Company recorded $1.4 million during the year ended December 31, 2018 as compensation expense pertaining to these grants. The Company marks-to-market the expense for the restricted stock units granted to the consultants.

During the year ended December 31, 2018, the Company issued 843,486 time-based restricted stock units to an employee for a 2017 performance-based bonus pursuant to their employment agreement. The bonus was paid in restricted stock in the first quarter of 2018, based on the average closing stock price for the 30 days preceding March 1, 2018. Compensation expense of $1.5 million was fully recognized in 2017 related to this grant.

During the year ended December 31, 2017, the Company granted 52,083 time-based restricted stock units to a consultant for future services. These shares of time-based restricted stock units had a grant date fair value of $0.1 million and vest over a period of six months. The Company recorded less than $0.1 million during the years ended December 31, 2018 and 2017 as compensation expense pertaining to these grants.

During the year ended December 31, 2017, the Company accelerated the vesting of 16,667 shares of time-based restricted stock units for an employee pursuant to their termination agreement. Total compensation expense related to these shares of $0.1 million was recorded as operating expenses in the consolidated statement of operations for the year ended December 31, 2017.

During the year ended December 31, 2017, the Company granted 200,000 time-based restricted stock units to certain employees for future services and 276,753 time-based restricted stock units to a consultant for future services. These shares of time-based restricted stock units had a grant date fair value of $1.4 million and vest over a period of three years. The Company recorded $0.4 million and $0.2 million during the years ended December 31, 2018 and 2017, respectively, as compensation expense pertaining to these grants.

During the year ended December 31, 2017, the Company granted 100,000 time-based restricted stock units to the Company’s Chief Executive Officer pursuant to an employment agreement, dated April 3, 2017. These shares of time-based restricted stock units had a grant date fair value of $0.4 million and vest over a period of three years. The Company recorded $0.1 million during each of the years ended December 31, 2018 and 2017, respectively, as compensation expense pertaining to this grant.

During the year ended December 31, 2017, the Company accelerated the vesting of 66,667 shares of time-based restricted stock units for the Company’s former Chief Executive Officer in connection with the CEO transition. Total compensation expense related to these shares of $0.7 million was recorded as operating expenses in the consolidated statement of operations for the year ended December 31, 2017.

During the year ended December 31, 2017, the Company granted 60,000 time-based restricted stock units to the Company’s former Chief Financial Officer pursuant to an amended employment agreement, dated January 3, 2017. These shares of time-based restricted stock units had a grant date fair value of $0.3 million and a vesting period of two years. Upon the former Chief Financial Officer’s departure, these shares were forfeited prior to vesting during the year ended December 31, 2017. Compensation expense previously recognized was reversed during the year ended December 31, 2017.

During the year ended December 31, 2016, the Company granted 260,000 shares of time-based restricted stock units to employees for future services. These shares of time-based restricted stock had a grant date fair value of $1.8 million and vest over a period of three years. The Company recorded $0.5 million, $0.7 million and $0.2 million during the years ended December 31, 2018, 2017 and 2016, respectively, as compensation expense pertaining to this grant.

Total compensation expense related to time-based restricted stock units grants for the years ended December 31, 2018, 2017 and 2016 was $2.4 million, $1.8 million and $0.6 million, respectively. Total accrued compensation expense related to performance-based restricted stock units for the year ended December 31, 2017 was $1.5 million. Total unrecognized compensation expense related to time-based restricted stock units grants at December 31, 2018 amounted to $1.9 million and is expected to be recognized over a weighted average period of 2.2 years.

Performance Stock Units

A summary of the PSUs activity for the years ended December 31, 2018, 2017 and 2016 is as follows:


				Weighted-Average
		Weighted-Average		Remaining
		Grant Date Fair		Contractual Life
	Number of Shares	Value		(in Years)

Unvested - January 1, 2016	1,308,500	$	10.98	1.4
Granted	2,134,100		7.23
Vested	(317,833)		(9.58)
Forfeited or Cancelled	(321,400)		(11.89)
Unvested - January 1, 2017	2,803,367	$	8.18	2.4
Granted	716,600		3.17
Vested	(701,233)		(10.97)
Forfeited or Cancelled	(773,100)		(7.22)
Unvested - January 1, 2018	2,045,634	$	5.83	2.0
Granted	785,000		1.98
Vested	(350,408)		(4.71)
Forfeited or canceled	(260,408)		(7.32)
Unvested - December 31, 2018	2,219,818	$	4.47	0.8

During the year ended December 31, 2018, the Company granted 135,000 PSUs to employees pursuant to their employment agreements. These PSUs had a grant date fair value of $0.3 million, vest over a period of one to two years and require achievement of certain performance metrics within each fiscal year for such PSUs to be earned. The Company issued 83,250 PSUs to an employee related to this grant. The fair value and expense recorded for such PSUs was based on the closing price of the Company’s common stock on the date the performance metric was communicated to the employee. The Company recorded $0.2 million in compensation expense during the year ended December 31, 2018 as operating expenses in the consolidated statements of operations.

During the year ended December 31, 2018, the Company granted 200,000 PSUs to an employee upon their commencement of employment with the Company. These PSUs had a grant date fair value of $0.4 million, vest over a period of three years and require achievement of certain of the Company’s performance metrics within each fiscal year for such PSUs to be earned. The Company did not record any compensation expense during the year ended December 31, 2018 as the likelihood of these PSUs being earned was not considered probable.

During the year ended December 31, 2018, the Company granted 200,000 PSUs to an employee upon their commencement of employment with the Company. These PSUs had a grant date fair value of $0.5 million, vest over a period of two years and require achievement of certain of the Company’s performance metrics within each fiscal year for such PSUs to be earned. The Company did not record any compensation expense during the year ended December 31, 2018 as the likelihood of these PSUs being earned was not considered probable.

During the year ended December 31, 2018, the Company granted 250,000 PSUs to a consultant pursuant to their endorsement agreement. The PSUs had a grant date fair value of $0.5 million, vest over a period of five years and require achievement of certain sales targets within each fiscal year for such PSUs to be earned. The Company did not record any compensation expense during the year ended December 31, 2018 as the likelihood of these PSUs being earned was not considered probable.

On February 20, 2018, the Compensation Committee voted to approve, on a discretionary basis, vesting of 208,883 PSUs to employees and consultants previously granted during the years ended December 31, 2016 and 2017 subject to achievement of certain of the Company’s performance metrics within each fiscal year. The fair value and expense recorded for such PSUs was based on the closing price of the Company’s common stock on the date the modification of the performance metric was communicated to employees and consultants. Total compensation expense related to these PSUs of $0.5 million was recorded as operating expenses in the consolidated statements of operations for the year ended December 31, 2018.

During the year ended December 31, 2017, the Company granted 200,000 PSUs to an employee upon their commencement of employment with the Company. These PSUs had a grant date fair value of $0.7 million and vest over a period of three years and require achievement of certain of the Company’s performance metrics within each fiscal year for such PSUs to be earned. The Company recorded expense related to this award for the year ended December 31, 2018 as part of the discretionary vesting approved by the Compensation Committee on February 20, 2018. No additional expense was recorded during the year ended December 31, 2018 as the likelihood of these PSUs being earned was not probable. The Company did not record any compensation expense during the year ended December 31, 2017 as the likelihood of these PSUs being earned was not probable.

On July 25, 2017, the Compensation Committee voted to approve, on a discretionary basis, an award of 41,600 PSUs to employees and consultants. The fair value and expense recorded for such PSUs was based on the closing price of the Company’s common stock on the date the modification of the performance metric was communicated to employees and consultants. The Company recorded expense related to this award for the year ended December 31, 2018 as part of the discretionary vesting approved by the Compensation Committee on February 20, 2018. No additional expense was recorded during the year ended December 31, 2018 as the likelihood of these PSUs being earned was not probable. The Company did not record any compensation expense during the year ended December 31, 2017 as the likelihood of these PSUs being earned was not probable.

During the year ended December 31, 2017, the Company granted 300,000 PSUs to the Company’s Chief Executive Officer. These PSUs had a grant date fair value of $0.8 million and vest over a period of three years and require achievement of certain of the Company’s performance metrics within each fiscal year for such PSUs to be earned. The Company recorded expense related to this award for the year ended December 31, 2018 as part of the discretionary vesting approved by the Compensation Committee on February 20, 2018. No additional expense was recorded during the year ended December 31, 2018 as the likelihood of these PSUs being earned was not probable. The Company did not record any compensation expense during the year ended December 31, 2017 as the likelihood of these PSUs being earned was not probable.

During the year ended December 31, 2017, the Company granted 175,000 PSUs to the Company’s Chief Executive Officer pursuant to an employment agreement, dated April 3, 2017. These PSUs had a grant date fair value of $0.7 million and vest over a period of three years and require achievement of certain of the Company’s performance metrics within each fiscal year for such PSUs to be earned. The Company recorded $0.2 million in compensation expense during the year ended December 31, 2018 as the performance metrics were achieved pursuant to fiscal year end results. The Company recorded $0.1 million in compensation expense during the year ended December 31, 2018, respectively, as the likelihood of these PSUs being earned was considered probable for the current fiscal year.

During the year ended December 31, 2017, the Company accelerated the vesting of 200,000 PSUs for the Company’s former Chief Executive Officer in connection with the CEO transition. Total compensation expense related to these PSUs of $2.9 million was recorded as operating expenses in the consolidated statement of operations for the year ended December 31, 2017.

On February 28, 2017, the Compensation Committee voted to approve, on a discretionary basis, an award of 164,978 PSUs to employees and consultants. Included in the above award were 60,000 PSUs and 36,000 PSUs for the Company’s former Chief Executive Officer and Chief Financial Officer, respectively. The fair value and expense recorded for such PSUs was based on the closing price of the Company’s common stock on the date the modification of the performance metric was communicated to employees and consultants. Total compensation expense related to these PSUs of $0.6 million was recorded as operating expenses in the consolidated statements of operations for the year ended December 31, 2017.

During the year ended December 31, 2016, the Company accelerated the vesting of 108,500 PSUs in connection with restructuring activities. Total compensation expense related to these PSUs of $0.5 million was recorded as operating expenses in the consolidated statement of operations for the year ended December 31, 2016.

During the year ended December 31, 2016, the Company granted 2,104,100 PSUs to employees and consultants and 30,000 PSUs to an employee upon the commencement of his employment with the Company. These PSUs had a grant date fair value of $15.4 million, vest over a period of three years and require achievement of certain of the Company’s performance metrics within each fiscal year for such PSUs to be earned. The Company recorded less than $0.1 million during the year ended December 31, 2016 as compensation expense in the consolidated statement of operations pertaining to these PSUs as the likelihood of a portion of these PSUs being earned became probable. The Company did not record any compensation expense during the year ended December 31, 2017 as the likelihood of these PSUs being earned was not probable.

On February 23, 2016, the Compensation Committee voted to approve, on a discretionary basis, an award of 69,994 PSUs to employees and consultants. Included in the above award were 20,000 PSUs and 12,000 PSUs for the Company’s Chief Executive Officer and Chief Financial Officer, respectively. The fair value and expense recorded for such PSUs was based on the closing price of the Company’s common stock on the date the modification of the performance metric was communicated to employees and consultants. Total compensation expense related to these PSUs of $0.4 million was recorded as operating expenses in the consolidated statement of operations for the year ended December 31, 2016.

Total compensation expense related to the PSUs for the years ended December 31, 2018, 2017 and 2016 was $0.9 million, $3.5 million and $4.0 million, respectively.