MEMSIC Inc - FORM 10-Q - XML - IDEA: XBRL DOCUMENT - May 11, 2012

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v2.4.0.6
Note 9 - Stock Based Compensation
 3 Months Ended
Mar. 31, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
9. STOCK BASED COMPENSATION

Description of Plan

On March 29, 2000, the Company’s stockholders and board of directors approved the 2000 Omnibus Stock Plan (the “2000 Plan”), as amended, under which 2,969,000 shares of the Company’s common stock were reserved for issuance to directors, officers, employees, and consultants.  With the adoption of the 2007 Plan discussed below, the Company no longer grants awards under the 2000 Plan.

On August 22, 2007, the Company’s board of directors approved the 2007 Stock Incentive Plan (the “2007 Plan”), under which up to 3,000,000 shares of the Company’s common stock may become available for issuance. At the adoption date, 1,526,425 shares were reserved for issuance. The reserved amount will increase by 300,000 shares at each of the five anniversaries of the adoption date, for a maximum of 3,000,000 shares issuable under the 2007 Plan.

Options granted under the 2000 Plan and the 2007 Plan may be incentive stock options or nonqualified stock options. Both the 2000 Plan and the 2007 Plan provide that the exercise price of incentive stock options must be at least equal to the market value of the Company’s common stock at the date such option is granted. For incentive stock option grants to an employee who owns more than 10% of the outstanding shares of common stock of the Company, the exercise price on the incentive stock option must be 110% of market value at the time of grant. Granted options expire in ten years or less from the date of grant and vest based on the terms of the awards, generally ratably over four years.

Prior to December 19, 2007, there was no public market for the Company’s common stock. Accordingly, the board of directors determined the market value of the common stock at the date of grant by considering a number of relevant factors, including the Company’s operating and financial performance and corporate milestones achieved, the prices at which shares of convertible preferred stock in arm’s-length transactions were sold, the composition of and changes to the management team, the superior rights and preferences of securities senior to the common stock at the time of each grant and the likelihood of achieving a liquidity event for the shares of common stock underlying stock options.

On December 9, 2009, the Company’s board of directors approved the 2009 Nonqualified Inducement Stock Option Plan (the “2009 Plan”) with an effective date on January 15, 2010, the closing date of the acquisition of Crossbow assets. Under the 2009 Plan, up to 1,250,000 shares of the Company’s common stock may become available for issuance. On December 23, 2010, the Company’s board of directors approved an Amended and Restated 2009 Nonqualified Inducement Stock Option Plan (the “Amended and Restated Plan”) and an increase in shares of the Company’s common stock available for issuance under the Amended and Restated Plan from 1,250,000 to 2,500,000. Except as otherwise determined by the Compensation Committee of the Company’s board of directors, the form of option to be employed under the Amended and Restated Plan shall be substantially identical to the form of nonqualified option customarily used under the Company’s 2007 Stock Incentive Plan.

On June 29, 2011 at its Annual Meeting of Stockholders, the Company’s stockholders and board of directors approved the amendment and restatement of the Company’s 2007 Plan. The Amended and Restated 2007 Plan

 
· 
permits the granting of restricted stock units (“RSU”), performance-based stock awards and stock appreciation rights;

 
· 
eliminates the ability to reprice options;

 
· 
extends the expiration date of the plan to June 29, 2021;

 
· 
provides that awards may qualify as “performance-based compensation” under Section 162(m) of the Internal Revenue Code of 1986, as amended; and

 
· 
incorporates certain other administrative provisions.

The approval of the amendment and restatement of the 2007 Plan does not change the number of shares available for awards under the 2007 Plan.

Valuation of Stock Options

The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of an option award. The key input assumptions used in the Black-Scholes option pricing model include: (i) the risk-free interest rate is based on the yield available on U.S. Treasury zero-coupon bonds at the date of grant with maturity dates approximately equal to the expected life at the grant date, (ii) the expected life of the options is based on evaluations of historical and expected future employee exercise behavior; (iii) volatility is based on the implied volatility of the Company’s common stock, which the Company believes results in the best estimate of the grant-date fair value of employee stock options because it reflects the market’s current expectations of future volatility. Prior to January 1, 2010, due to limited historical information on the volatility of the Company’s common stock, the Company determined the volatility for options based on an analysis of reported data for a peer group of companies that issued options with substantially similar terms; and (iv) dividend yield of zero, as the Company has not paid dividends in the past and it does not expect to in the foreseeable future. The Company utilizes historical data to estimate pre-vesting forfeitures and records stock-based compensation expense only for those awards that are expected to vest.

The Company did not grant any stock options during the first quarter of 2012. The weighted-average fair value per share of the options granted during the three months ended March 31, 2011 was $1.81, utilizing the following assumptions:

   
Three months ended
March 31,
 
   
2012
   
2011
 
Volatility
 
NA
    64%  
Expected dividend yield
  0%     0%  
Expected life
 
NA
   
5.8 years
 
Risk free interest rate
 
NA
    2.34%  
Forfeitures
  36%     38%  

The Company accounts for stock options granted to consultants using the fair value method for the calculation of compensation cost. For the three months ended March 31, 2012 and 2011, the Company recorded compensation expense for stock option grants to consultants in the amount of $0 and $10,700, respectively.

At March 31, 2012, total unrecognized stock-based compensation expense for stock options granted to the Company’s employees and directors was approximately $1.8 million.

The stock option activity under the 2000, 2007 and 2009 Stock Plan is as follows:

   
Options
Outstanding
   
Weighted
Average
Exercise Price
   
Remaining
Contractual
Term in Years
   
Aggregrate
Intrinsic Value
 
                         
Options outstanding at January 1, 2012
    2,338,805     $ 5.00       6.5     $ 1,131,474  
                                 
Granted
    -       -       -       -  
Exercised
    (11,655 )     1.97       -       -  
Cancelled
    (33,863 )     3.21       -       -  
                                 
Options outstanding at March 31, 2012
    2,293,287     $ 5.04       6.3     $ 1,819,241  
                                 
Options vested at March 31, 2012
    1,425,062     $ 4.64       5.1     $ 1,473,487  
                                 
Available for grant at March 31, 2012
    2,774,338                          

The intrinsic values (aggregate market value minus aggregate exercise price) of stock options exercised during the three months ended March 31, 2012 and 2011 were $17,259 and $5,720, respectively. The total fair value of options vested during the three months ended March 31, 2012 and 2011 was approximately $164,000 and $406,000, respectively.

Stock-based compensation expenses related to stock options, restricted stock awards (“RSAs”) and RSUs were charged to the following expenses:

   
Three months ended
March 31,
 
   
2012
   
2011
 
             
Research and development
  $ 44,252     $ 121,194  
Sales and marketing
    67,721       66,015  
General and administrative
    210,954       214,206  
Total
  $ 322,927     $ 401,415  

The Company accounted for RSAs and RSUs using the fair value at the date of the grant for the calculation of compensation cost. For the three months ended March 31, 2012, the Company recorded compensation expense for RSAs and RSUs in the amount of $67,000 and $70,000 respectively.

As of March 31, 2012, total unrecognized compensation expenses related to non-vested RSAs and RSUs were $0.2 million and $2.3 million, respectively. These expenses are expected to be recognized over a weighted average period of 3.0 years for RSAs and 3.6 years for RSUs.

A summary of RSA activity for the three months ended March 31, 2012 is as follows:

   
Shares
   
Weighted
Average
Market Value
at Grant Date
 
             
Nonvested at January 1, 2012
    140,000     $ 3.41  
Awarded
    -       -  
Vested
    -       -  
Forfeited
    -       -  
                 
Nonvested at March 31, 2012
    140,000     $ 3.41  

A summary of RSU activity for the three months ended March 31, 2012 is as follows:

   
Shares
   
Weighted
Average
Market Value
at Grant Date
 
             
Nonvested at January 1, 2012
    534,000     $ 3.12  
Awarded
    301,000       3.39  
Vested
    -       -  
Forfeited
    (64,000 )     2.99  
                 
Nonvested at March 31, 2012
    771,000     $ 3.24  

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