Quarterly report pursuant to Section 13 or 15(d)

STOCK BASED COMPENSATION

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STOCK BASED COMPENSATION
3 Months Ended
Mar. 31, 2019
Equity [Abstract]  
STOCK BASED COMPENSATION
STOCK BASED COMPENSATION

Stock-based compensation to employees and non-employees is 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 Restricted Stocks Units ("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. The Company adopted ASU 2016-09 and 2018-07 during the year ended December 31, 2018 and recognizes forfeitures as they occur. There were none since the adoption of these pronouncements.

On June 21, 2017, at the annual meeting of stockholders, the Company's shareholders approved (i) an increase of 1,000,000 shares to the Finjan Holdings, Inc. 2014 Plan and (ii) the addition of an “evergreen” feature which provides for the annual replenishment of shares to the Restated 2014 Plan share reserve without stockholder approval, which represented an additional 1,385,366 shares as of January 1, 2018 and 1,378,432 shares as of January 1, 2019 (equal to 5.0% of our outstanding shares of Common Stock as of the end of our immediately preceding fiscal year). As of March 31, 2019, the Company has 2,943,535 shares available for issuance under the 2014 Plan.

During the three months ended March 31, 2019 and 2018, the Company expensed $0.2 million and $0.3 million, respectively, of stock-based compensation in the condensed consolidated statements of operations. All stock-based compensation expenses were related to selling, general and administration.

Stock Options

The following table is a summary of stock option activity during the three months ended March 31, 2019:
 
 
Number of
Options Outstanding
 
Weighted Average Exercise Price
 
Weighted Average Remaining Contractual Life (in years)
 
Aggregate Intrinsic Value (in thousands)
Outstanding 2013 & 2014 Plans – December 31, 2018
 
2,486,646

 
$
1.89

 
7.00

 
$
1,550

Options granted
 

 

 

 

Options exercised
 

 

 

 

Options forfeited
 

 

 

 

Outstanding – March 31, 2019
 
2,486,646

 
$
1.89

 
6.75

 
$
2,541

Exercisable – March 31, 2019
 
1,536,425

 
$
1.67

 
5.60

 
$
1,937



As of March 31, 2019, total compensation cost not yet recognized related to restricted stock awards and unvested stock options was approximately $2.1 million, which is expected to be recognized over a weighted-average period of 2.0 years.

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:
 
Three Months ended March 31, 2018 (1)
Volatility
 
104.99%
Expected term (in years)
 
6
Risk-free rate
 
2.24%
Expected dividend yield
 
Weighted-average grant date fair value per option
$
2.24
(1) During the three months ended March 31, 2019, there is no issuance of stock options
 
 


The risk-free interest rate is the United States Treasury rate for the day of the grant having a term equal to the life of the equity instrument. The volatility is a measure of the amount by which the Company’s share price has fluctuated or is expected to fluctuate; the Company used its common stock volatility along with the average of historic volatilities of comparative companies. The dividend yield is zero percent as the Company has not made any dividend payment and has no plans to pay dividends in the foreseeable future. Due to the limited historical information, the Company determines the expected term of its stock option awards by using the simplified method, which assumes each vesting tranche of the award has a term equal to average of the contractual term and the vesting period.

Restricted Stock Units

The following table is a summary of restricted stock units award activity during the three months ended March 31, 2019:
 
Three Months ended
 
March 31, 2019
 
Number of Shares
 
Weighted Average Grant Date Fair Value
Non-vested at beginning of period
315,292

 
$
2.26

Shares vested
27,184

 
2.34

Non-vested
288,108

 
$
2.26



The aggregate intrinsic value of the unvested RSU's was $0.8 million as of March 31, 2019.