Stockholders' equity |
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| Stockholders' equity |
Stockholders’ equity
Common Stock
In 2015, the Company raised additional funds through the private placement of common stock. In connection with these placements, the Company sold an aggregate of 2,350,734 shares of common stock in a purchase price range from $3.37 and $4.75 per share, resulting in net cash proceeds of $8,859,767.
Beginning on April 11, 2016 through its conclusion on May 3, 2016, the Company entered into numerous private placement share exchange agreements ("Share Exchange Agreements") with shareholders of Ilios ("Exchanging Shareholders"), a majority owned subsidiary of the Company. Pursuant to the Share Exchange Agreements, the Exchanging Shareholders agreed to exchange every 7.86 of their restricted Ilios shares of common stock for 1 share of the Company's restricted common stock. In addition, the Company granted each Exchanging Shareholder registration rights of the Company's common stock they received in exchange for their Ilios shares. The Company issued a total of 670,464 shares of its common stock in exchange for Ilios shares of common stock. Pursuant to the Registration Rights Agreement, the Company filed a registration statement covering the resale of the shares.
Upon execution of the exchange agreements for 100% of the shares of Ilios, the Company no longer had a non-controlling interest in its subsidiary. On April 30, 2016, Ilios was merged into the Company, and accounting for the noncontrolling interest in the subsidiary ended.
The holders of Common Stock have the right to vote their interest on a per share basis. At December 31, 2016 and 2015, there were 19,981,912 and 18,478,990 shares of Common Stock outstanding, respectively.
Preferred Stock
On February 13, 2013, the Company authorized preferred stock of 10 million shares. At December 31, 2016, no shares were issued or outstanding.
Warrants
In December 2015, 900,000 warrants were issued in conjunction with a private placement executed with the Ultra Emissions Joint Venture described in Note 13. In July 2016, the warrant holders exercised a total of 675,000 warrants with a $4.00 exercise price, resulting in cash proceeds of $2.7 million to the Company. The remaining 225,000 warrants expired, July 31, 2016. In conjunction with the Ultratek Joint Venture, the Board of Directors granted 250,000 warrants to Dr. Elias Samaras at $4.00 a share with an expiration date of December 28, 2017.
Stock-Based Compensation
In 2006, the Company adopted the 2006 Stock Option and Incentive Plan (the “Plan”), under which the board of directors may grant incentive or non-qualified stock options and stock grants to key employees, directors, advisors and consultants of the Company. The Plan was amended at various dates by the board to increase the reserved shares of common stock issuable under the Plan to 3,838,750 as of December 31, 2016 (the “Amended Plan”).
Stock options vest based upon the terms within the individual option grants, with an acceleration of the unvested portion of such options upon a change in control event, as defined in the Amended Plan. The options are not transferable except by will or domestic relations order. The option price per share under the Amended Plan cannot be less than the fair market value of the underlying shares on the date of the grant. The number of shares remaining available for future issuance under the Amended Plan as of December 31, 2016 and 2015 was 1,607,357 and 1,614,533, respectively.
In 2016, the Company granted nonqualified options to purchase an aggregate of 207,701 shares of common stock for between $0.79 and $4.27 per share to certain employees and a director. Of these options, 82,701 fully vested options were issued in conjunction with the merger of Ilios as replacement options for those previously granted Ilios options in Ilios. The remaining 125,000 options have a vesting schedule of 4 years and expire in 10 years. The fair value of the options issued in 2016 was $236,315. The weighted-average grant date fair value of stock options granted during 2016 was $1.14 per option.
In 2015, the Company granted nonqualified options to purchase an aggregate of 165,000 shares of common stock in a range of $3.39 and $4.05 per share, respectively to certain employees and a consultant. These options have a vesting schedule of four years and expire in ten years. The fair value of the options issued in 2015 was $250,462. The weighted-average grant date fair value of stock options granted during 2015 was $1.52 per option. In October 2015, the Board of Directors modified the performance options granted in 2014 to the Company's standard vesting schedule.
Stock option activity for the year ended December 31, 2016 was as follows:
Using the Company's historical forfeiture rate of 15%, the table above uses said rate in the expected to vest calculation. The Company uses the Black-Scholes option pricing model to determine the fair value of stock options granted. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs. Expected volatility was calculated based on the average volatility of four comparable publicly traded companies. The average expected life was estimated using the simplified method to determine the expected life based on the vesting period and contractual terms, since it does not have the necessary historical exercise data to determine an expected life for stock options. The Company uses a single weighted-average expected life to value option awards and recognizes compensation on a straight-line basis over the requisite service period for each separately vesting portion of the awards. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term which approximates the expected life assumed at the date of grant.
The weighted average assumptions used in the Black-Scholes option pricing model for options granted in 2016 and 2015 are as follows:
The Company granted restricted stock awards to its employees and directors. The performance based awards have vesting schedules of 25% or 33% per year beginning one year after the Company's IPO in 2014.
Restricted stock activity for the year ended December 31, 2016 was as follows:
During the years ended December 31, 2016 and 2015, the Company recognized stock-based compensation of $165,931 and $189,511, respectively, related to the issuance of stock options and restricted stock. No tax benefit was recognized related to the stock-based compensation recorded during the years. At December 31, 2016 and 2015, the total compensation cost related to unvested restricted stock awards and stock option awards not yet recognized is $444,939 and $592,494, respectively. This amount will be recognized over a weighted average period of 2.93 years.
Stock Based Compensation - Ilios
In 2009, Ilios adopted the 2009 Stock Incentive Plan (the “2009 Plan”) under which the board of directors may grant incentive or non-qualified stock options and stock grants to key employees, directors, advisors and consultants of the company. The maximum number of shares allowable for issuance under the Plan is 2,000,000 shares of common stock. The 2009 Plan had 1,325,000 available for grant as of March 31, 2016. At the time of the merger between Ilios and the Company, stock options vested with an acceleration of the unvested portion upon the change in control event, as defined in the Plan. These options were exchanged for options for Tecogen stock at the same ratio and price as the share exchange described above. The grant was for a total of 82,701 options. The impact of the option exchange was immaterial.
Ilios has granted restricted stock awards to its employees and directors. The awards had service conditions and vested upon merger. Restricted stock activity for the Ilios awards, for the year ended December 31, 2016 was as follows:
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