LAPOLLA INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
Note 17. Securities Transactions.
(a) During 2010, the Company accepted the voluntary redemption of an aggregate of 100 shares of Series D Preferred Stock, par value $1.00, at the stated value of $1,000 per share, from a director, for an aggregate of $100,000 in cash. See also Note 13 - Related Party Transactions, Item (a).
(b) During 2010, the Company issued an aggregate of 1,426 shares of Series D Preferred Stock, par value $1.00 per share, to a director in exchange for cancellation of $18,800 in loans payable - related party, $200 in accrued interest, and $1,406,670 in accrued preferred stock dividends, at $1,000 stated value per share. See also Note 13 - Related Party Transactions, Items (b), (c), and (g).
(c) During 2010, the Company issued an aggregate of 19,600,573 shares of restricted common stock, par value $.01 per share, to a director in exchange for $10,000,000 of Series D Preferred Stock and cancellation of $388,304 of accrued preferred stock dividends. See also Note 13 - Related Party Transactions, Item (i).
(d) During 2010, the Company issued an aggregate of 160,000 shares of restricted common stock to non-employee directors pursuant to a Director Share Based Compensation Program. See also Note 13 - Related Party Transactions, Item (h).
(e) During 2009, the Company issued an aggregate of 5,840 shares of Series D Preferred Stock, par value $1.00 per share, to a director in exchange for cancellation of a $5,100,000 note payable - related party and $740,000 in loans payable - related party. See also Note 13 - Related Party Transactions, Item (p).
(f) During 2009, the Company accepted the voluntary redemption of an aggregate of 100 shares of Series D Preferred Stock, par value $1.00, at the stated value of $1,000 per share, from a director, for $100,000 in cash. See also Note 13 - Related Party Transactions, Items (m) and (o).
Note 18. Share–Based Payment Arrangements.
The Company reports share-based compensation arrangements under GAAP using a lattice-based option valuation model to calculate compensation expense over the requisite service period of grants. At December 31, 2010, the Company had two share-based compensation plans, the Equity Incentive Plan (“Equity Plan”) and Director Restricted Stock Plan ("Director Plan"), in effect, and warrants issued during 2007 and 2008 outstanding. Compensation cost charged against income for all compensation and incentive plans for 2010 and 2009 was $100,831 and $538,836, respectively.
Equity Incentive Plan
The Company’s Equity Plan, which is shareholder-approved, permits the grant of stock awards to eligible participants for up to 10,000,000 shares of common stock. The purpose of the Equity Plan is to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward employees, directors and consultants performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company. The Equity Plan provides financial performance measures upon which specific performance goals would be based and limits on the numbers of shares or compensation that could be made. Option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant. Stock awards may provide for accelerated vesting if there is a change in control. The fair value of each stock options is estimated on the date of grant using a lattice-based valuation model that uses the assumptions noted in the following table. Because lattice-based valuation models incorporate ranges of assumptions for inputs, those ranges are disclosed. Expected volatilities are based on the historical volatility of the Company’s common stock. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The expected term of options granted is derived from the output of the valuation model and represents the periods that options granted are expected to be outstanding; the range given below results from certain groups of employees exhibiting different behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
|
|
|
2010
|
|
|
2009
|
|
|
Expected Volatility
|
|
|
155.09 |
% |
|
|
252.64 |
% |
|
Weighted-Average Volatility
|
|
|
155.09 |
% |
|
|
252.64 |
% |
|
Expected Dividends
|
|
|
— |
|
|
|
— |
|
|
Expected Term (in years)
|
|
|
4.77 |
|
|
|
2.7 |
|
|
Risk Free Rate
|
|
|
2.14 |
% |
|
|
2.45 |
% |
As of December 31, 2010, total compensation cost related to non-vested stock options was $2,159,258, which is expected to be recognized over the 2.46 years after December 31, 2010 (29.6 months on a weighted-average basis).
Stock option activity under the Company’s Equity Plan as of the years ended December 31, is summarized below:
| |
|
2010
|
|
|
2009
|
|
|
Options
|
|
Number
of Options
|
|
|
Weighted-Average
Exercise Price
|
|
|
Number
of options
|
|
|
Weighted-Average
Exercise Price
|
|
|
Outstanding-Beginning of Year
|
|
|
7,015,333 |
|
|
$ |
0.64 |
|
|
|
7,290,333 |
|
|
$ |
0.66 |
|
|
Granted
|
|
|
800,000 |
|
|
|
0.60 |
|
|
|
320,000 |
|
|
|
0.35 |
|
|
Exercised
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Canceled, Expired or Forfeited
|
|
|
(1,675,000 |
) |
|
|
0.74 |
|
|
|
(595,000 |
) |
|
|
0.67 |
|
|
Outstanding-End of Year
|
|
|
6,140,333 |
|
|
|
0.61 |
|
|
|
7,015,333 |
|
|
|
0.64 |
|
|
Exercisable-End of Year
|
|
|
1,770,208 |
|
|
$ |
0.57 |
|
|
|
1,591,973 |
|
|
$ |
0.57 |
|
The weighted-average grant-date fair value of options granted during 2010 and 2009 was $.60 and $.35, respectively. There were 3,859,667 options available for grant at December 31, 2010. Refer to Equity Plan and Warrants Summary below for range of exercise prices.
