Annual report pursuant to Section 13 and 15(d)

Stock-Based Compensation

v3.5.0.2
Stock-Based Compensation
12 Months Ended
Apr. 30, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation

Note 9. Stock-based compensation

 

Option Plans

 

The Company had a 2001 incentive and non-statutory stock option plan for the purpose of permitting certain key employees to acquire equity in the Company and to promote the growth and profitability of the Company by attracting and retaining key employees. In general, the plan allows granting of up to 100,000 shares of the Company’s Common Stock at an option price to be no less than the fair market value of the Company’s Common Stock on the date such options are granted. Currently, options granted under the plan vest ratably on the annual anniversary date of the grants. Vesting periods for options currently granted under the plan ranged from one to five years. No further options may be granted under this plan. The Company also has a 2011 incentive and non-statutory stock option plan for the purpose of permitting certain key employees and consultants to acquire equity in the Company and to promote the growth and profitability of the Company by attracting and retaining key employees. No executive officer or director of the Company is eligible to receive options under the 2011 plan. In general, the plan allows granting of up to 11,111 shares of the Company’s Common Stock at an option price to be no less than the fair market value of the Company’s Common Stock on the date such options are granted. Options granted under the plan vest ratably on the annual anniversary date of the grants. All shares have been granted under this plan.

 

The Company has a 2014 Equity Incentive Plan (the “Plan”), and reserves under the plan for issuance 83,333 shares of common stock. There are approximately 14,333 shares available for future grant.

 

The Board of Directors has exclusive authority to determine which officers, employees, and directors who provide services to the Company will be entitled to receive a benefit under the Plan and to administer awards under the Plan to those eligible individuals. The Board retains the authority to appoint a Compensation Committee at any time, consisting of one or more Board members, to determine awards under the Plan. The Compensation Committee will determine, among things, the selection of those individuals to be granted awards under the Plan among those individuals eligible for participation, the level of participation of each participant, when and how each award under the plan will be granted, and what type or combination of types of awards will be granted.

 

The Plan provides for the granting of qualified and non-qualified stock options Incentive stock options may be granted only to participants who meet the definition of “employees” under Section 3401(c) of the Code and bonus shares.

 

Stock options provide the recipient with the right to purchase shares of common stock at a price not less than their fair market value on the date of the grant. The stock option price is payable in cash, by tendering previously acquired shares of common stock having an aggregate fair market value at the time of exercise equal to the option price, by cashless (broker-assisted) exercise, or any other method approved by the Board. No stock option may be exercised more than 10 years from the date of grant.

 

Stock options granted under the Plan may be stock options that are intended to qualify as incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). Incentive stock options may be granted only to participants who meet the definition of “employees” under Section 3401(c) of the Code. In addition, in order to qualify for incentive stock option treatment, in the case of options granted to a holder of 10% or more of the company’s common stock, the stock option price may not be less than 110% of the fair market value of the stock on the date the stock option is granted.

 

Stock Appreciation Rights

 

Stock Appreciation Rights- A Stock Appreciation Right (“SAR”) provides the recipient with the right to receive from us an amount, determined by the Board and expressed as a percentage (not exceeding 100%), of the difference between the base price established for the appreciation rights and the market value of the common stock on the date the rights are exercised. Appreciation rights can be tandem (i.e., granted with option rights to provide an alternative to the exercise of the option rights) or free-standing. Tandem appreciation rights may only be exercised at a time when the related option right is exercisable and the spread is positive, and requires that the related option right be surrendered for cancellation. Free-standing appreciation rights must have a base price per right that is not less than the fair market value of the common stock on the grant date, must specify the period of continuous employment that is necessary before such appreciation rights become exercisable and may not be exercisable more than 10 years from the grant date.

 

Bonus Shares

 

Bonus Shares- Bonus Shares are an award to an eligible person of shares for services to be rendered or for past services already rendered to the Company. The Board will determine the number of shares to be awarded to the eligible individual, in accordance with any restrictions thereon. These restrictions may be based upon completion of a specified number of years of service with the Company or upon satisfaction of performance goals based on performance factors. Payment for the Bonus Shares may be made in the form of cash, whole shares, or a combination thereof, based on the fair market value of the shares on the date of payment, as determined in the sole discretion of the Board.

 

The status of these plans for the years ended April 30, 2016 and April 30, 2015 is as follows:

 

    Shares     Weighted
average
exercise
price
    Weighted
average
remaining
contractual life
    Aggregate
intrinsic
value (1)
 
Balance April 30, 2014     81,859     $ 36.81       4.46     $ 6,250  
                                 
Granted                        
Exercised                        
Expired     (39,944 )   $ 48.72              
                                 
Balance May 1, 2015     41,915     $ 25.44       3.59     $  
                                 
Granted     79,556     $ 4.89              
Expired     (12,444 )   $ 38.13              
Exchanged / cancelled     (109,027 )   $ 9.03              
Balance April 30, 2016                     $  

 

(1) This amount represents the difference between the exercise price and $1.86, the closing price of Dataram common stock on April 30, 2016 as reported on the NASDAQ Stock Market, for all in-the-money options outstanding and all the in-the-money shares exercisable

 

In fiscal year ended April 30, 2016, the Company granted stock options to purchase 79,556 shares of common stock to certain employees, officers and board of directors of the Company. The Company’s consolidated statements of operations for fiscal 2016, includes approximately $746,000 of stock-based compensation expense. In the fiscal year ended April 30, 2015, the Company did not grant any stock options. For fiscal year ended April 30, 2015 the Company recorded approximately $14,000 of stock-based compensation expense.

 

On January 19, 2016, the Company entered into exchange agreements (the “Option Exchange Agreements”) (Note 6) with certain of its employees pursuant to which such employees agreed to return options to purchase an aggregate of up to 109,027 shares of common stock in consideration for restricted stock grants (the “Restricted Stock Grants”) in the aggregate amount of 87,736 shares of Common Stock pursuant to the Company’s 2011 Equity Incentive Plan and 2014 Equity Incentive Plan, as amended. The Restricted Stock Grants are vested in full upon issuance. The Company recorded an additional one time stock based compensation expense of approximately $122,000 as a result of the stock option exchange agreements. As of April 30, 2016, there was no unearned compensation costs related to stock options remaining.

 

The fair value of each stock option granted during fiscal year ended April 30, 2016 was estimated on the date of grant using the Black-Scholes option pricing model using the following assumptions:

 

  Fiscal Year Ended
April 30, 2016
Expected term (years) 2.5-3.0
Expected volatility 79%-80%
Dividend yield 0
Risk-free interest rate .90% -1.01%
Weighted average per share grant date fair value $2.34 - $3.09

 

The expected life represents the period that the Company’s stock-based awards are expected to be outstanding and was calculated using the simplified method pursuant to ASC 825. Expected volatility is based on the historical volatility of the Company’s Common Stock using the daily closing price of the Company’s Common Stock, pursuant to Staff Accounting Bulletin 107. Expected dividend yield assumes the current dividend rate remains unchanged. Expected forfeiture rate is based on the Company’s historical experience. The risk-free interest rate is based on the rate of U.S Treasury zero-coupon issues with a remaining term equal to the expected life of the option grants.

 

The Company calculated stock-based compensation expense using a 5% forefiture rate.

 

Warrants

 

On January 15, 2016, the Company entered into separate exchange agreements with various warrant holders, refer to (“Note 6”) Equity Exchange transactions.

 

At April 30, 2016, the Company had 207,625 warrants outstanding with exercise prices between $7.50 and $40.68. At April 30, 2015, the Company had 1,102,758 warrants outstanding with exercise prices between $6.00 and $40.68. A summary of warrant activity for the Fiscal year ended April 30, 2016 and 2015 is as follows:

 

    Shares     Weighted
average
exercise
price
    Weighted
average
remaining
contractual life years
    Aggregate
intrinsic
value (1)
 
Balance May 1, 2014     161,925     $ 24.27       3.34        
                                 
Issued     940,833     $ 7.88                
Exchanged                            
Expired                            
Balance April 30, 2015     1,102,758     $ 10.56       4.12        
                                 
Issued     16,667     $ 7.50                
Exchanged     (881,800 )   $ 8.10                  
Expired     (30,000 )   $ 7.50                  
Balance April 30, 2016     207,625     $ 19.74       1.24        

 

(1) This amount represents the difference between the conversion price and $1.86, the closing price of Dataram common stock on April 30, 2016 as reported on the NASDAQ Stock Market, for all in-the-money warrants outstanding.