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Stock-Based Compensation

12 Months Ended

Dec. 31, 2018

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

Stock-Based Compensation

8.	Stock-Based Compensation

We have adopted equity incentive plans for which stock options and restricted stock awards are available to grant to employees, consultants and directors. Except for certain options granted to certain Swedish employees, all employee, consultant and director stock options granted under our stock option plans have an exercise price equal to the market value of the underlying common stock on the grant date. There are no vesting provisions tied to performance conditions for any options, as vesting for all outstanding option grants was based only on continued service as an employee, consultant or director. All of our outstanding stock options and restricted stock awards are classified as equity instruments.

Stock Options

During the year ended 2015, our shareholders approved the Neonode Inc. 2015 Stock Incentive Plan (the “2015 Plan”) which replaces our 2006 Equity Incentive Plan (the “2006 Plan”). Under the 2015 Plan, 210,000 shares of common stock have been reserved for awards, including nonqualified stock option grants and restricted stock grants to officers, employees, non-employee directors and consultants. The terms of the awards granted under the 2015 Plan are set by our compensation committee at its discretion. During the year ended December 31, 2018, 30,000 stock options were granted under the 2015 Plan.

Accordingly, as of December 31, 2018, we had two equity incentive plans:

	●	The 2006 Equity Incentive Plan (the “2006 Plan”).
	●	The 2015 Equity Incentive Plan (the “2015 Plan”).

The following table summarizes information with respect to all options to purchase shares of common stock outstanding under the 2006 Plan and the 2015 Plan at December 31, 2018:

Options Outstanding
Range of Exercise Price		Number Outstanding and exercisable at 12/31/18				Weighted Average Remaining Contractual Life (years)				Weighted Average Exercise Price

$ 0 - $ 15.00			32,500				2.46			$	14.95
$ 15.01 - $ 42.50			55,300				0.76			$	40.62
$ 42.51 - $ 62.10			12,000				1.60			$	59.60
			99,800				1.41			$	34.55

A summary of the combined activity under all of the stock option plans is set forth below:

		Options Outstanding
										Weighted-
										Average
						Weighted-				Remaining
						Average				Contractual				Aggregate
		Number of				Exercise				Life				Intrinsic
		Shares				Price				(in years)				Value
Options outstanding – January 1, 2017			184,600			$	43.90							$	-
Options granted			-				-								-
Options exercised			-				-								-
Options cancelled or expired			(9,000	)			82.10								-
Options outstanding – December 31, 2017			175,600			$	41.99				2.18				-
Options granted			30,000				15.00								-
Options exercised			-				-								-
Options cancelled or expired			(105,800	)			41.36								-
Options outstanding and vested – December 31, 2018			99,800			$	34.55				1.41			$	-

There were 30,000 stock options granted during the years ended December 31, 2018. No stock options were granted in 2017. The assumptions used to value stock options granted to directors, employees and consultants during the year ended December 31, 2018 are as follows:

		For the year ended
		December 31, 2018

Annual dividend yield			-
Expected life (years)			1.5
Risk-free interest rate			2.19	%
Expected volatility			71.12	%

During the years ended December 31, 2018 and 2017, we recorded $29,000 and $72,000, respectively, of compensation expense related to the vesting of stock options. The estimated fair value of the stock-based compensation was calculated using the Black-Scholes option pricing model as of the grant date of the stock option.

Stock options granted under the 2006 and 2015 Plans are exercisable over a maximum term of ten years from the date of grant, vest in various installments over a one to four-year period and have exercise prices reflecting the market value of the shares of common stock on the date of grant.

Stock-Based Compensation

The stock-based compensation expense for the years ended December 31, 2018 and 2017 reflects the estimated fair value of the vested portion of options granted to directors, employees and non-employees.

		Years ended December 31,
		2018				2017
(In thousands)
Research and development		$	-			$	-
Sales and marketing			6				50
General and administrative			23				22
Stock-based compensation expense		$	29			$	72

There is no remaining unrecognized expense related to stock options as of December 31, 2018.

The estimated fair value of stock-based awards is calculated using the Black-Scholes option pricing model, even though this model was developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which differ significantly from our stock options. The Black-Scholes model also requires subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values. The risk-free rate is based on the U.S. Treasury rates in effect during the corresponding period of grant. The expected volatility is based on the historical volatility of our stock price. These factors could change in the future, which would affect fair values of stock options granted in such future periods and could cause volatility in the total amount of the stock-based compensation expense reported in future periods.