Stock Options

12 Months Ended

Dec. 31, 2013

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

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

8. Stock Options

The Company adopted, with stockholder approval, the Innodata Inc. 2013 Stock Plan (the “2013 Plan”). The maximum number of shares of common stock that may be delivered, purchased or used for reference purposes with respect to awards granted under the 2013 Plan is 1,041,096 shares, plus any shares subject to an award or portion of any award under the Innodata Isogen, Inc. 2009 Stock Plan, as amended and restated (the “Prior Plan”) that were outstanding as of June 4, 2013 that expire or terminate unexercised, become unexercisable or are forfeited or otherwise terminated, surrendered or canceled as to any shares without the delivery of shares of stock or other consideration. Shares of stock subject to options or stock appreciation rights (“SARs”) granted under the 2013 Plan count against the share reserve as one share for every one share subject to such option or SAR and shares subject to any other type of award granted under the 2013 Plan count against the share reserve as two shares for every one share subject to such award. If any award, or portion of an award, under the 2013 Plan expires or terminates unexercised, becomes unexercisable or is forfeited or otherwise terminated, surrendered or canceled as to any shares without the delivery of shares of stock or other consideration, the shares subject to such award will thereafter be available for further awards under the 2013 Plan as provided in the next sentence. Shares of stock that again become available for awards pursuant to the expiration, termination, forfeiture or cancellation of any award (other than an option or SAR) granted under the 2013 Plan, or of any award (other than an option or SAR) granted after March 31, 2011 under the Prior Plan, will be added back as two shares for every one share subject to such award or Prior Plan award. All other awards under the 2013 Plan and all other awards under the Prior Plan will be added back as one share for every one share subject to such award or Prior Plan award. The number of shares used for reference purposes in connection with these awards will be considered "delivered" for purposes of computing the maximum number of shares that may be delivered under the Plan.

All directors, officers, employees, and other persons who render services to the Company, are eligible to participate in the 2013 Plan. The 2013 Plan provides for the grant of stock options (which may be incentive stock options within the meaning of the Internal Revenue Code of 1986, as amended, or non-qualified stock options), stock appreciation rights, restricted stock, stock units and performance grants. Any stock options granted under the 2013 Plan may have a maximum term of up to ten years.

The Company’s Board of Directors may amend, alter, suspend, discontinue, or terminate the 2013 Plan or any portion thereof at any time; provided that no such amendment, alteration, suspension, discontinuation or termination shall be made without shareholder approval if such approval is necessary to comply with any tax or regulatory requirement applicable to the 2013 Plan; and provided further that any such amendment, alteration, suspension, discontinuance or termination that would impair the rights of any participant or any holder or beneficiary of any award theretofore granted shall not to that extent be effective without the consent of the affected participant, holder or beneficiary. Notwithstanding the foregoing, the Board of Directors may unilaterally amend the 2013 Plan and outstanding awards without participant consent as it deems necessary or appropriate to ensure compliance with applicable securities laws and provisions of the Internal Revenue Code of 1986, as well as due to specified corporate transaction as set forth in the 2013 Plan).

The fair value of stock options is estimated on the date of grant using the Black-Scholes option pricing model. The weighted average fair values of the options granted and weighted average assumptions are as follows:

	For the Years Ended December 31,
		2013			2012			2011

Weighted average fair value of options granted	$	1.89		$	2.32		$	1.61

Risk-free interest rate		0.76	%		0.65%-0.74%			0.9%-2.8%
Expected life (years)		5-7			5			5-8
Expected volatility factor		67	%		69	%		68%-74%
Expected dividends		None			None			None

The Company estimates the risk-free interest rate using the U.S. Treasury yield curve for periods equal to the expected term of the options in effect at the time of grant. The expected term of options granted is based on a combination of vesting schedules, term of the options and historical experience. Expected volatility is based on historical volatility of the Company’s common stock. The Company uses an expected dividend yield of zero since it has never declared or paid any dividends on its capital stock.

A summary of option activity under the Plans as of December 31, 2013, and changes during the year then ended, is presented below:

		Weighted-Average		Weighted-Average Remaining	Aggregate Intrinsic
	Number of Options	Exercise Price		Contractual Term (years)	Value

Outstanding at January 1, 2013	2,986,057	$	2.75
Granted	1,014,022	$	1.89
Exercised	(201,500)	$	0.96
Forfeited/Expired	(750,510)	$	3.09
Outstanding at December 31, 2013	3,048,069	$	2.99	4.48	$	365,410

Exercisable at December 31, 2013	943,557	$	2.98	2.13	$	361,610
Vested and expected to vest at
December 31, 2013	3,048,069	$	2.99	4.48	$	365,410

The total compensation cost related to non-vested stock options not yet recognized as of December 31, 2013 totaled approximately $1.6 million. The weighted-average period over which these costs will be recognized is twenty-three months.

Because of the Company’s net operating loss carryforwards, no tax benefits resulting from the exercise of stock options have been recorded, thus there was no effect on cash flows from operating or financing activities.

The total intrinsic value of options exercised during the year amounted to approximately $0.5 million for the years ended December 31, 2013 and 2012. No options were exercised during the year ended December 31, 2011.

In July 2013, the Company’s Chairman and CEO (the “CEO”) exercised 126,000 stock options at a total exercise price of $0.1 million. The CEO paid the exercise price by surrendering to the Company 19,688 of the shares of common stock he would have otherwise received on the option exercise. In addition, the CEO surrendered 49,382 shares to the Company in consideration of the payment by the Company on his behalf of $158,023 of the Company’s minimum withholding tax requirement payable in respect of the option exercise. Because the payment value attributable to the surrendered shares upon settlement does not exceed the fair value of the option, no compensation cost was recognized at the date of settlement. In connection with this transaction, the Company issued a net total of 56,930 shares of common stock to the CEO.

A summary of restricted shares under the Company’s stock option plans as of December 31, 2013, and changes during the period then ended, are presented below:

			Weighted-Average Grant
	Number of Shares		Date Fair Value

Unvested at January 1, 2013	32,500	$	3.14
Granted	-		-
Vested	(7,500)		2.59
Forfeited/Expired	—		-
Unvested at December 31, 2013	25,000	$	3.31

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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