XML 31 R19.htm IDEA: XBRL DOCUMENT v2.4.0.6
STOCK OPTIONS
 12 Months Ended
Dec. 31, 2011
STOCK OPTIONS  
STOCK OPTIONS

13.            STOCK OPTIONS

 

Stock options

 

The Company has approved stock option plans for the granting of stock options to employees, Directors, and consultants.  Options for the purchase of 25,680 shares of Common Stock remain outstanding under the 1999 Stock Option Plan, which terminated pursuant to its terms in 2009.  Options for the purchase of 2,849,108 shares of Common Stock have been issued under the 2008 Stock Option Plan, which authorized a total of 3,000,000 shares of Common Stock upon the exercise of stock options.  Options for the purchase of 2,485,411 shares under the 2008 Stock Option Plan were outstanding as of December 31, 2011.  Options for the purchase of a total of 225,000 shares of Common Stock remain outstanding under individual stock option plans to Dr. Jimmie Shiu and Mr. Harry Watson.  Options for the purchase of 3,000,000 shares of Common Stock remain outstanding under an option granted to Mr. Thomas J. Shaw.

 

On September 26, 2008, the Company conducted an Exchange Offer whereby employees, including executive officers, and Directors exchanged certain outstanding underwater options for options issued under the 2008 Stock Option Plan.  The Company issued new options under the 2008 Stock Option Plan to purchase an aggregate of 962,683 shares of Common Stock in exchange for the cancellation of the tendered options.  Options issued to employees, including executive officers, vested in 2010.  Options issued to non-employee Directors vested in 2009.

 

In July 2009, the Company issued options for the purchase of a total of 1,886,425 shares to Directors, Executive Officers, employees, and consultants under the 2008 Stock Option Plan.  Of this amount, incentive stock options for the purchase of 269,956 shares of Common Stock and Non-Qualified Stock Options for the purchase of 229,494 shares of Common Stock were issued to Executive Officers and Directors.  Additionally, in 2009, an option to purchase Three Million (3,000,000) shares issued to Thomas J. Shaw outside these plans was approved by shareholders.

 

The Compensation and Benefits Committee administers all plans and determines and/or recommends to the Board exercise prices at which options are granted.  All executive compensation, including the granting of stock options, is determined by the Compensation and Benefits Committee.  Shares issued upon exercise of options come from the Company’s authorized but unissued Common Stock.  The options vested over periods up to three years from the date of grant and generally expire ten years after the date of grant.  Unvested options issued under the 2008 Stock Option Plan expire immediately after termination of employment.

 

Employee options

 

A summary of Director, officer, and employee options granted and outstanding under the Plans is presented below:

 

 

 

Years Ended December 31,

 

 

 

2011

 

2010

 

2009

 

 

 

Shares

 

Weighted
Average
Exercise
Price

 

Shares

 

Weighted
Average
Exercise
Price

 

Shares

 

Weighted
Average
Exercise
Price

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at beginning of period

 

5,508,513

 

$

0.91

 

 5,721,528

 

$

0.94

 

1,057,263

 

$

1.99

 

Granted

 

—

 

—

 

—

 

—

 

4,796,425

 

0.81

 

Exercised

 

(67,122

)

(0.81

)

(142,715

)

(0.81

)

(5,085

)

(1.30

)

Forfeited

 

(7,800

)

(0.85

)

(70,300

)

(3.09

)

(127,075

)

(4.99

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at end of period

 

5,433,591

 

$

0.91

 

5,508,513

 

$

0.91

 

5,721,528

 

$

0.94

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable at end of period

 

5,433,591

 

$

0.91

 

5,508,513

 

$

0.91

 

1,137,403

 

$

1.44

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average fair value of options granted during period

 

—

 

$

—

 

—

 

$

—

 

—

 

$

0.59

 

 

The fair value of each 2009 grant is estimated on the date of the grant using the Black-Scholes pricing model with the following weighted average assumptions used for grants in 2009:  expected volatility of 67.53%, risk free interest rate of 3.35%, and an expected life of 8.61 to 8.69 years.  Other than the options issued to the Chief Executive Officer, the options were issued under the 2008 Stock Option Plan.  No options were issued in 2010 or 2011.

 

The following table summarizes information about Director, officer, and employee options outstanding under the aforementioned plans at December 31, 2011:

 

Exercise
Prices

 

Shares

Outstanding

 

Weighted

Average
Remaining
Contractual
Life

 

Shares
Exercisable

 

 $

 6.90

 

15,080

 

0.75

 

15,080

 

 $

 8.65

 

2,400

 

1.48

 

2,400

 

 $

 8.87

 

700

 

2.36

 

700

 

 $

 1.30

 

894,513

 

6.88

 

894,513

 

 $

 0.81

 

4,520,898

 

7.54

 

4,520,898

 

 

Non-employee options

 

A summary of options outstanding during the years ended December 31 and held by non-employees is as follows:

 

 

 

Years Ended December 31,

 

 

 

2011

 

2010

 

2009

 

 

 

Shares

 

Weighted
Average
Exercise
Price

 

Shares

 

Weighted
Average
Exercise
Price

 

Shares

 

Weighted
Average
Exercise
Price

 

Outstanding at beginning of period

 

302,500

 

$

5.49

 

391,600

 

$

6.52

 

454,700

 

$

8.41

 

Granted

 

—

 

—

 

—

 

—

 

90,000

 

0.84

 

Exercised

 

—

 

—

 

—

 

—

 

(20,000

)

(0.95

)

Forfeited

 

—

 

—

 

(89,100

)

(10.00

)

(133,100

)

(10.00

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at end of period

 

302,500

 

$

5.49

 

302,500

 

$

5.49

 

391,600

 

$

6.52

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable at end of period

 

302,500

 

$

5.49

 

302,500

 

$

5.49

 

391,600

 

$

6.52

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average fair value of options granted during period

 

—

 

$

—

 

—

 

$

—

 

—

 

$

0.61

 

 

The fair value of each 2009 grant is estimated on the date of the grant using the Black Scholes pricing model with the following assumptions:  expected volatility of 67.53%, risk free interest rate of 3.35%, and an expected life of 8.61 years.  These options were issued under the 2008 Stock Option Plan.  No options were issued in 2010 or 2011.

 

The following table summarizes information about non-employee options outstanding under the aforementioned plans at December 31, 2011:

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

Remaining

 

 

 

Exercise

 

Shares

 

Contractual

 

Shares

 

Prices

 

Outstanding

 

Life

 

Exercisable

 

 $

 6.90

 

232,500

 

0.75

 

232,500

 

 $

 0.81

 

70,000

 

7.54

 

70,000

 

 

The Company recorded $0; $1,340,300; and $2,111,360 as stock-based compensation expense in 2011, 2010, and 2009, respectively.  The total intrinsic value of options exercised was $49,626; $124,221; and $16,388 in 2011, 2010, and 2009, respectively.  The aggregate intrinsic value of options outstanding and of options exercisable at December 31, 2011 was approximately $1.7 million.  There is no compensation cost related to non-vested stock options to be recognized in the future.

 

Options Pricing Models – Assumptions

 

The expected life and forfeiture rate assumptions are based on the vesting period for each option grant and expected exercise behavior.  The assumptions for expected volatility and dividend yield are based on recent historical experience.  Risk-free interest rates are set using grant-date U.S. Treasury yield curves for the same periods as the expected term.