v2.3.0.15
Shared Based Payment
9 Months Ended
Sep. 30, 2011
Shared Based Payment [Abstract] 
Shared Based Payment
11. Share Based Payment

Stock Compensation

Under the Clean Diesel Technologies, Inc. 1994 Incentive plan, as amended (the “Plan”), awards may be granted to participants in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, performance awards, bonuses or other forms of share-based awards or cash, or combinations of these as determined by the board of directors. The Company measures compensation cost for all stock-based awards at fair value on the date of grant and recognizes it over the service period for awards expected to vest. The maximum number of awards allowed under the Plan is 17.5% of the Company’s outstanding common stock less the then outstanding awards, subject to sufficient authorized shares. There were 828,028 shares available under the plan at September 30, 2011.

Stock-based compensation expense for both employee and non-employee awards for the three and nine months ended September 30, 2011 and 2010 was as follows (in thousands):

 

                                 
    Three Months  Ended
September 30,		     Nine Months  Ended
September 30,		  
        2011             2010             2011             2010      
         

Selling, general and administrative

         $ 170             $ 43             $ 1,153             $ 134    

Research and development

     12         —         204         —    
   

 

 

    

 

 

    

 

 

    

 

 

  

Total stock-based compensation expense

         $ 182             $ 43             $ 1,357             $ 134    
   

 

 

    

 

 

    

 

 

    

 

 

  

 

Stock Options

Stock option activity for the nine months ended September 30, 2011 and stock option information as of September 30, 2011 is summarized as follows:

 

                                 
        Shares           Weighted  
Average
Exercise
Price		     Weighted
Average
Remaining
  Contractual  
Term
(in years)		       Aggregate  
Intrinsic
Value		  
         

Outstanding at January 1, 2011

     151,801             $ 53.55         —                 —            

Granted

     182,459             $ 5.68         —                 —            

Expired

     (47,101)            $ 60.67         —                 —            
   

 

 

                          

Outstanding at September 30, 2011

     287,159            $ 21.96         7.67                 —            
   

 

 

                          

Exercisable at September 30, 2011

     194,263            $ 29.70         6.82                 —            
   

 

 

                          

The aggregate intrinsic value represents the difference between the exercise price and the Company’s closing stock price on the last trading day of the quarter ended September 30, 2011.

On March 17, 2011, the Company granted stock options covering a total 182,459 common shares, 50 percent of which vested on the date of grant and 50 percent on the first anniversary of the date of grant. The option price of $5.68 per share was equal to the closing market price of the underlying common shares on the grant date. The fair value of these stock options, based on the Black-Scholes option-pricing model, was $3.66 per share. The following assumptions were used to value these options:

 

         

Expected volatility

     77.4%  

Risk-free interest rate

     2.0%  

Dividend yield

     0.0%  

Expected life in years

     5.25    

The expected term of the options has historically been based upon the historical term until exercise or expiration of all granted options. Due to the significant change in the Company following the Merger and significant change in the terms of the options granted, CDTI’s historical exercise data was not considered to provide a reasonable basis for estimating the expected term for current option grants. As such, the expected term of stock options granted on March 17, 2011 was determined using the “simplified method” as allowed under ASC 718-10-S99. The “simplified method” calculates the expected term as the average of the vesting term and original contractual term of the options. Also, due to the significant change in the Company following the Merger, CDTI’s historical price volatility was not considered representative of expected volatility going forward. Therefore, the Company utilized an estimate based upon the historical volatility of a portfolio of peer companies. The risk-free interest rate is the constant maturity rate published by the U.S. Federal Reserve Board that corresponds to the expected term of the option. The dividend yield is assumed as 0% because the Company has not paid dividends and does not expect to pay dividends in the future.

As of September 30, 2011, total compensation cost related to options granted under the Plan but not yet recognized was approximately $0.2 million, net of estimated forfeitures. This cost will be amortized on a straight-line basis over a weighted average period of approximately 0.4 years.

Restricted Stock Units

On June 8, 2011, the Company’s Board of Directors approved a form of Restricted Share Unit Agreement under the Plan. RSU awards are awards under the Plan that have an exercise price equal to zero and, upon vesting are settled in shares of the Company’s common stock on a one-for-one basis. The fair value of the RSU awards is based on the closing market price of the Company’s common stock on the date of grant, and the Company recognizes compensation expense on a straight-line basis over the requisite vesting period. On June 8, 2011, the Company granted RSU awards to executive officers as well as other key employees that are to be settled by delivering a total of 122,127 common shares with a grant date fair value of $6.17. Of these RSUs, 92,677 vested in full seven business days from the grant date. The remaining 29,450 of these RSUs are time-based and vest on the following schedule: 33.3% of the total number of RSUs vest seven days from the grant date and each of the first and second anniversaries of the grant date. On September 8, 2011, the Company granted RSU awards to an executive officer as well as other key employees that are to be settled by delivering a total of 18,934 common shares with a grant date fair value of $3.80. Of these RSUs, the 13,334 issued to an executive officer vested in full six business days from the grant date. The remaining 5,600 of these RSUs are time-based and 33.3% vest on each of the first, second and third anniversaries of the grant date.

RSU activity for the nine months ended September 30, 2011 and stock option information as of September 30, 2011 is summarized as follows:

 

                         
      Shares       Weighted
Average
  Grant Date  
Fair Value		       Aggregate  
Intrinsic
Value		  
       

Non-vested share units at January 1, 2011

     —          —            —      

Granted

     141,061                 $5.85           —      

Vested

     (115,823)                 $5.90           —      
   

 

 

                  

Non-vested share units at September 30, 2011

     25,238                  $5.64           —      
   

 

 

                  

As of September 30, 2011, the Company had approximately $0.1 million of unrecognized compensation expense, net of estimated forfeitures, related to RSUs, which will be recognized over a weighted average estimated remaining life of 1.4 years.