Quarterly report pursuant to Section 13 or 15(d)

STOCK BASED COMPENSATION

v3.8.0.1
STOCK BASED COMPENSATION
9 Months Ended
Sep. 30, 2017
Equity [Abstract]  
STOCK BASED COMPENSATION
STOCK BASED COMPENSATION

On July 10, 2014, the Company’s stockholders approved the Finjan Holdings, Inc. 2014 Incentive Compensation Plan (the "2014 Plan") at the annual meeting of stockholders, pursuant to which 2,196,836 shares of common stock were authorized for issuance.

Upon shareholder approval of the 2014 Plan, the 2013 Global Share Option Plan was terminated, other than with respect to options outstanding under such plan 1,620,507 options remain outstanding under the 2013 and 2014 plans as of September 30, 2017.

On June 24, 2015, the Company adopted the 2015 Israeli Sub-plan (the “2015 Israeli Sub-plan”) to the Company’s 2014 Plan, which enables the Company to grant options, and issue shares of common stock to employees and non-employees, who are employed by the Company or any of its affiliates, who are residents of the State of Israel.

On June 21, 2017, at the annual meeting of stockholders, the Company's shareholders approved an increase of 1,000,000 shares to the Finjan Holdings, Inc. 2014 Plan. As of September 30, 2017, the Company has 1,670,276 shares available for issuance under the 2014 Plan.

The Company has issued a total of 1,213,084 Restricted Stock Units ("RSUs") of which 462,046 remain outstanding as of September 30, 2017.  RSUs generally vest over three or four years, with one-third or one-fourth, respectively, vesting on the one-year anniversary followed by quarterly vesting thereafter.  

Stock-based compensation to employees and non-employees are recognized as expense in the condensed consolidated statement of operations. The compensation cost for all stock-based awards is measured at the grant date, based on the fair value of the award (determined using Black-Scholes option pricing model for stock options and fair value for RSUs), and is recognized as an expense over the requisite service period (generally the vesting of the equity awards). Determining the fair value of stock-based awards at the grant date requires significant estimates and judgments, including future employee stock option exercise behavior and requisite service periods.

During the three and nine months ended September 30, 2017, the Company expensed $221,000 and $641,000, respectively, and $229,000 and $682,000 for the three and nine months ended September 30, 2016, respectively, of stock-based compensation in the condensed consolidated statements of operations. All stock-based compensation expenses were related to selling, general and administration. The aggregate intrinsic value of stock options and RSU's outstanding and exercisable as of September 30, 2017 was $2.4 million.
 
During the three and nine months ended September 30, 2017, the Company granted options to purchase zero and 165,000 shares of common stock, respectively. During the three and nine months ended September 30, 2017, the Company granted 176,212 and 376,212 RSUs of common stock, respectively.

During the three and nine months ended September 30, 2017, 21,840 and 141,840 stock options were exercised, resulting in cash proceeds of $0.2 million, respectively.

Number of
Options Outstanding and Exercisable
 
Number of RSUs
Outstanding
 
 
 
 
 
 
 
Outstanding 2013 & 2014 Plans – December 31, 2016
 
1,607,347

 
Non vested - December 31, 2016
 
185,260

Options granted
 
165,000

 
Shares granted
 
376,212

Options exercised
 
(141,840
)
 
Shares vested
 
(99,426
)
Options forfeited
 
(10,000
)
 
Shares forfeited
 

Options expired
 

 
Shares expired
 

Outstanding – September 30, 2017
 
1,620,507

 
Non Vested & Outstanding - September 30, 2017
 
462,046

Exercisable – September 30, 2017
 
1,255,822

 
 
 
 


The Company estimates the fair values of stock options using the Black-Scholes option-pricing model. The assumptions used in the Black-Scholes option-pricing model and the weighted-average grant date fair value of the option awards for the periods presented were as follows:
 
Nine Months Ended September 30,
 
2017
 
2016
Volatility
 
132% - 141%
 
 
149% - 152%
Expected term (in years)
 
6
 
 
7
Risk-free rate
 
1.82% - 2.19%
 
 
1.22% - 1.26%
Expected dividend yield
 
0%
 
 
0%
Weighted-average grant date fair value per option
$
1.45 - 3.32
 
$
0.96 - 1.15

 
As of September 30, 2017, total compensation cost not yet recognized related to unvested stock options was approximately $1.1 million, which is expected to be recognized over a weighted-average period of 1.5 years.

Options granted during the nine months ended September 30, 2017 had a weighted average exercise price of $1.61 per share, and a weighted average contractual term of 10 years.

The risk-free interest rate is based on the U.S. Treasury rates with maturities similar to the expected term of the option. The volatility is a measure of the amount by which the Company’s share price has fluctuated or is expected to fluctuate and was based on historical volatility of comparative companies that are similar to the Company. For the nine months ended September 30, 2017, the Company updated its volatility assumptions to reflect the increased trading history in the Company’s stock. The expected term was estimated using the simplified method. The simplified method calculates the expected term as the average of the time to vesting and the contractual life of the option. The dividend yield is 0% as the Company has never declared or paid any cash dividends and does not anticipate paying dividends in the future.