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Shareholders' Equity | 12 Months Ended
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Dec. 31, 2018
Shareholders' Equity |
Shareholders' Equity | 9. Shareholders’ Equity Registered Direct Offerings In March 2017, the Company sold approximately 200,000 shares of its common stock at a purchase price of $7.85 per share and received net proceeds of approximately $1,554,000, after deducting estimated offering expenses. In April 2017, the Company sold approximately 30,000 shares of its common stock at a purchase price of $7.78 per share and received net proceeds of approximately $219,000, after deducting estimated offering expenses. In June 2018, the Company sold approximately 346,000 shares of its common stock at a purchase price of $4.50 per share and received net proceeds of approximately $1,375,000, after deducting estimated offering expenses. The Company used the net proceeds from the offerings for general corporate purposes, which included working capital, general and administrative expenses, capital expenditures and implementation of its strategic priorities. Equity Incentive Plans 2004 Performance Incentive Plan In September 2004 at a Special Meeting of Stockholders, the Company’s stockholders approved the 2004 Performance Incentive Plan (the “2004 Plan”). The 2004 Plan provided for the issuance of up to 50,000 shares of NTN common stock. In addition, all shares that remained unissued under the 1995 Employee Stock Option Plan (the “1995 Plan”) on the effective date of the 2004 Plan, and all shares issuable upon exercise of options granted pursuant to the 1995 Plan that expire or become unexercisable for any reason without having been exercised in full, were available for issuance under the 2004 Plan. Options under both the 1995 Plan and the 2004 Plan have a term of up to ten years, and are exercisable at a price per share not less than the fair market value on the date of grant. In September 2009, the 2004 Plan expired and all unexercised awards granted under that plan expired as of December 31, 2018, in accordance with that plan’s terms. 2010 Amended Performance Incentive Plan In June 2010, the Company’s stockholders approved the 2010 Performance Incentive Plan (the “2010 Plan”). The 2010 Plan provided for the issuance of up to 120,000 shares of the Company’s common stock. At the Company’s 2015 Annual Meeting of Stockholders, the Company’s stockholders approved the Amended 2010 Performance Plan (the “Amended 2010 Plan”), which, among other things, amended the 2010 Plan to increase the authorized shares to be issued thereunder from 120,000 to 240,000. The Amended 2010 Plan expires in February 2020. Under the Amended 2010 Plan, options to the purchase the Company’s common stock or other instruments such as restricted stock units may be granted to officers, directors, employees and consultants. The Company’s Board of Directors designated its Nominating and Corporate Governance/Compensation Committee as the Amended 2010 Plan Committee. Stock options granted under the Amended 2010 Plan may either be incentive stock options or nonqualified stock options. A stock option granted under the Amended 2010 Plan generally cannot be exercised until it becomes vested. The Amended 2010 Plan Committee establishes the vesting schedule of each stock option at the time of grant. At its discretion, the Amended 2010 Plan Committee can accelerate the vesting, extend the post-termination exercise term or waive restrictions of any stock options or other awards under the Amended 2010 Plan. Options under the Amended 2010 Plan have a term of up to ten years, and are exercisable at a price per share not less than the fair market value on the date of grant. As of December 31, 2018, there were options to purchase approximately 62,000 shares of the Company’s common stock outstanding under the Amended 2010 Plan. As of December 31, 2018, there were approximately 47,000 share-based awards available to be granted under the Amended 2010 Plan. 2014 Inducement Plan In August 2014, the Nominating and Corporate Governance/Compensation Committee of the Company’s Board of Directors (the “Committee”) approved the 2014 Inducement Plan (the “2014 Plan”) in reliance on Section 771(a) of the NYSE American Company Guide as an inducement material to Ram Krishnan entering into employment with the Company as its Chief Executive Officer. The 2014 Plan provides for the issuance of up to 85,000 shares of the Company’s common stock, of which, an option to purchase 70,000 shares of common stock was issued to Mr. Krishnan in September 2014. In accordance with the terms of his employment agreement, in April 2015, Mr. Krishnan was granted another performance-based option to purchase 15,000 shares of common stock. Options under the 2014 Plan have a term of up to ten years and are exercisable at a price per share not less than the fair market value on the date of grant. Both of the option grants described above will, subject to Mr. Krishnan’s continued employment through the applicable vesting date and, with respect to the performance-based option granted in April 2015, subject to meeting performance goals, vest as to 25% of the total number of shares subject to the option on the first anniversary of the grant date and the remaining 75% of the total number of shares subject to the option will vest in 36 substantially equal monthly installments thereafter. There are no share-based awards available to be granted under the 2014 Plan. The 2014 Plan expires in September 2024. Stock-Based Compensation Valuation Assumptions The Company records stock-based compensation in accordance with ASC No. 718, Compensation – Stock Compensation and ASC No. 505-50, Equity – Equity-Based Payments to Non-Employees. The Company estimates the fair value of stock options using the Black-Scholes option pricing model. The fair value of stock options granted is recognized as expense over the requisite service period. Stock-based compensation expense for share-based payment awards to employees is recognized using the straight-line single-option method. Stock-based compensation expense for share-based payment awards to non-employees is recorded at its fair value on the grant date and is periodically re-measured as the underlying awards vest. The Company uses the historical stock price volatility as an input to value its stock options under ASC No. 718. The expected term of stock options represents the period of time options are expected to be outstanding and is based on observed historical exercise patterns of the Company, which the Company believes are indicative of future exercise behavior. For the risk-free interest rate, the Company uses the observed interest rates appropriate for the term of time options are expected to be outstanding. The dividend yield assumption is based on the Company’s history and expectation of dividend payouts. The following weighted-average assumptions were used for grants issued during 2018 and 2017 under the ASC No. 718 requirements:
|  | 2018 |  |  | 2017 |
Weighted average risk-free rate |  |  | 2.87 | % |  |  | 1.97 | %
Weighted average volatility |  |  | 113.20 | % |  |  | 113.57 | %
Dividend yield |  |  | 0.00 | % |  |  | 0.00 | %
Expected term |  |  | 7.06 years |  |  |  | 7.19 years |
The Company estimates forfeitures, based on historical activity, at the time of grant and revised if necessary in subsequent periods if actual forfeiture rates differ from those estimates. Stock-based compensation expense for employees during the years ended December 31, 2018 and 2017 was $443,000 and $457,000, respectively, and is expensed in selling, general and administrative expenses and credited to the additional paid-in-capital account. Stock Option Activity The following table summarizes stock option activities for the years ended December 31, 2018 and 2017:
|  | Outstanding Options |  |  | Weighted Average Exercise Price per Share |  |  | Weighted Average Remaining Contractual Life (in years) |  |  | Aggregate Intrinsic Value |
Outstanding January 1, 2017 |  |  | 165,000 |  |  | $ | 17.78 |  |  |  | 8.67 |  |  | $ | 36,000 |
Granted |  |  | 8,000 |  |  |  | 6.66 |  |  |  | - |  |  |  | - |
Exercised |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Cancelled |  |  | (8,000 | ) |  |  | 16.76 |  |  |  | - |  |  |  | - |
Forfeited |  |  | (9,000 | ) |  |  | 9.87 |  |  |  | - |  |  |  | - |
Expired |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Outstanding December 31, 2017 |  |  | 156,000 |  |  |  | 17.74 |  |  |  | 7.12 |  |  |  | - |
Granted |  |  | 2,000 |  |  |  | 4.44 |  |  |  | - |  |  |  | - |
Exercised |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Cancelled |  |  | (6,000 | ) |  |  | 10.42 |  |  |  | - |  |  |  | - |
Forfeited |  |  | (4,000 | ) |  |  | 6.38 |  |  |  | - |  |  |  | - |
Expired |  |  | (1,000 | ) |  |  | 16.00 |  |  |  | - |  |  |  | - |
Outstanding December 31, 2018 |  |  | 147,000 |  |  | $ | 18.20 |  |  |  | 6.08 |  |  | $ | - |
Options vested and exercisable at December 31, 2018 |  |  | 137,000 |  |  | $ | 18.81 |  |  |  | 5.99 |  |  | $ | - |
No options were exercised during the years ended December 31, 2018 or 2017. The per share weighted average grant-date fair value of stock options granted during the years ended December 31, 2018 and 2017 was $3.90 and $5.87, respectively. As of December 31, 2018, the unamortized stock based compensation expense related to outstanding unvested options was approximately $61,000 with a weighted average remaining requisite service period of 1.02 years. The Company expects to amortize this expense over the remaining requisite service period of these stock options. A deferred tax asset generally would be recorded related to the expected future tax benefit from the exercise of the non-qualified stock options. However, due to a history of net operating losses (“NOLs”), a full valuation allowance has been recorded related to the tax benefit for non-qualified stock options. Restricted Stock Unit Activity Outstanding restricted stock units are settled in an equal number of shares of common stock on the vesting date of the award. A stock unit award is settled only to the extent vested. Vesting generally requires the continued employment by the award recipient through the respective vesting date. Because restricted stock units are settled in an equal number of shares of common stock without any offsetting payment by the recipient, the measurement of cost is based on the quoted market price of the stock at the measurement date, which is the grant date. During the year ended December 31, 2018, the Company granted approximately 74,000 restricted stock units with a weighted average grant date fair value of $5.13 per restricted stock unit, all of which vest as to 16.67% of the total underlying shares on the six month anniversary of the grant date and as to the balance of the total underlying shares in 30 substantially equal monthly installments, beginning on the seven month anniversary of the grant date, subject to accelerated vesting in the event of a change in control. Of the 74,000 restricted stock units, 25,000 and 15,000 were granted to the Company’s Chief Executive Officer and Chief Financial Officer, respectively. The Company did not grant restricted stock units during the year ended December 31, 2017. The following table summarizes restricted stock unit activity for the year ended December 31, 2018:
|  | Outstanding Restricted Stock Units |  |  | Weighted Average Fair Value per Share |
January 1, 2018 |  |  | - |  |  | $ | - |
Granted |  |  | 74,000 |  |  |  | 5.13 |
Released |  |  | (13,000 | ) |  |  | 6.04 |
Cancelled |  |  | - |  |  |  | - |
December 31, 2018 |  |  | 61,000 |  |  | $ | 4.94 |
Balance exercisable at December 31, 2018 |  |  | 51,000 |  |  |  |  |
Under the 2010 Plan, in lieu of paying cash to satisfy withholding taxes due upon the settlement of vested restricted stock units, an employee may elect to have shares of common stock withheld that would otherwise be issued at settlement, the value of which is equal to the amount of withholding taxes payable. During the year ended December 31, 2018, approximately 13,000 restricted stock units vested and were settled, and as a result of employees electing to satisfy applicable withholding taxes by having the Company withhold shares, approximately 9,000 shares of common stock were issued. Warrant Activity The following summarizes warrant activities for the years ended December 31, 2018 and 2017:
|  | Outstanding Warrants |  |  | Weighted Average Exercise Price per Share |  |  | Weighted Average Remaining Contractual Life (in years) |
Outstanding January 1, 2017 |  |  | 132,000 |  |  | $ | 33.64 |  |  |  | 2.18 |
Granted |  |  | - |  |  |  | - |  |  |  | - |
Exercised |  |  | - |  |  |  | - |  |  |  | - |
Forfeited |  |  | (60,000 | ) |  |  | - |  |  |  | - |
Outstanding December 31, 2017 |  |  | 72,000 |  |  | $ | 20.00 |  |  |  | 0.87 |
Granted |  |  | - |  |  |  | - |  |  |  | - |
Exercised |  |  | - |  |  |  | - |  |  |  | - |
Forfeited |  |  | (72,000 | ) |  |  | - |  |  |  | - |
Outstanding December 31, 2018 |  |  | - |  |  | $ | - |  |  |  | - |
Balance exercisable at December 31, 2018 |  |  | - |  |  | $ | - |  |  |  | - |
During 2013, the Company issued warrants to purchase an aggregate of 72,000 shares of common stock in connection with a private placement. The fair value of the warrants was approximately $1,379,000 in aggregate and was determined using the Black-Scholes model using the following weighted-average assumptions: risk-free interest rates of 1.06%; dividend yield of 0%; expected volatility of 80.25%; and a term of 5 years. The Company concluded that these warrants qualify as equity instruments and not liabilities. None of these warrants were exercised, and as of December 31, 2018, all outstanding warrants expired. Cumulative Convertible Preferred Stock The Company has authorized 156,000 shares of preferred stock, all of which is designated as Series A Cumulative Convertible Preferred Stock (the “Series A Preferred Stock”), and all of which were issued and outstanding as of December 31, 2018 and 2017. The Series A Preferred Stock provides for a cumulative annual dividend of $0.10 per share, payable in semi-annual installments in June and December. Dividends may be paid in cash or with shares of common stock. The Company paid approximately $16,000 in cash for payment of dividends in each of the years ended December 31, 2018 and 2017. The Series A Preferred Stock has no voting rights and has a $1.00 per share liquidation preference over common stock. The registered holder has the right at any time to convert shares of Series A Preferred Stock into that number of shares of common stock that equals the number of shares of Series A Preferred Stock that are surrendered for conversion divided by the conversion rate. At December 31, 2018, the conversion rate was 13.439 and, based on that conversion rate, all outstanding shares of Series A Preferred Stock would have converted into approximately 12,000 shares of common stock. The conversion rate is subject to adjustment in certain events and is established at the time of conversion. There were no conversions during either of the years ended December 31, 2018 and 2017. There is no mandatory conversion term, date or any redemption features associated with the Series A Preferred Stock.

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- Definition The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -URI http://asc.fasb.org/topic&trid=2208762 + Details
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