Stock-Based Compensation and Employee Benefit Plans | 3. STOCK-BASED COMPENSATION AND EMPLOYEE BENEFIT PLANS Vicor currently grants options for the purchase of Common Stock (i.e., “stock options”) under the following equity compensation plan that is stockholder-approved: Amended and Restated 2000 Stock Option and Incentive Plan, as amended and restated (the “2000 Plan”) non-employee non-qualified non-employee Picor Corporation (“Picor”), a privately held, majority-owned subsidiary of Vicor, currently grants stock options under the following equity compensation plan that has been approved by its Board of Directors: Amended and Restated 2001 Stock Option and Incentive Plan (the “2001 Picor Plan”) non-employee Non-qualifying VI Chip Corporation (“VI Chip”), a privately held, majority-owned subsidiary of Vicor, currently grants stock options under the following equity compensation plan that has been approved by its Board of Directors: Amended and Restated 2007 Stock Option and Incentive Plan (the “2007 VI Chip Plan”) non-employee Non-qualifying All time-based (i.e., non-performance-based) non-performance-based) On December 31, 2010, the Company granted 2,984,250 non-qualified On April 26, 2017, the Company’s Board of Directors approved the Vicor Corporation 2017 Employee Stock Purchase Plan (the “Plan” or the “ESPP”). The ESPP became effective on June 16, 2017, the date the Company’s stockholders approved the Plan at the 2017 Annual Meeting of Stockholders. The Company has reserved 2,000,000 shares of Common Stock under the Plan for issuance to eligible employees who elect to participate. The ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Code. The ESPP operates in successive periods of approximately six months, each referred to as an “offering period.” Generally, offering periods commence on or around September 1 and March 1 and end on or around the following February 28 or August 31, respectively. Under the ESPP, an option is granted to participating employees on the first day of an offering period to purchase shares of the Company’s Common Stock at the end of that offering period at a purchase price equal to 85% of the lesser of the fair market value of a share of Common Stock on either the first day or the last day of that offering period. The purchase of shares is funded by means of periodic payroll deductions, which may not exceed 15.0% of the employee’s eligible compensation, as defined in the Plan. Among other provisions, the Plan limits the number of shares that can be purchased by a participant during any offering period and cumulatively for any calendar year. Stock-based compensation expense for the years ended December 31 was as follows (in thousands): 2017 2016 2015 Cost of revenues $ 187 $ 95 $ 230 Selling, general and administrative 1,125 412 1,246 Research and development 423 (1 ) 306 Total stock-based compensation $ 1,735 $ 506 $ 1,782 The increase in stock-based compensation expense in 2017 compared to 2016, and the decrease in 2016 compared to 2015, was primarily due to the reversal of previously recorded stock-based compensation for VI Chip performance-based options in 2016, as described above. Compensation expense by type of award for the years ended December 31 was as follows (in thousands): 2017 2016 2015 Stock options $ 1,546 $ 506 $ 1,782 ESPP 189 — — Total stock-based compensation $ 1,735 $ 506 $ 1,782 The fair value for non performance-based stock options awarded for the years shown below was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions: Vicor: 2017 2016 2015 Risk-free interest rate 2.1 % 1.5 % 2.0 % Expected dividend yield — — — Expected volatility 43 % 45 % 51 % Expected lives (years) 7.1 7.2 7.2 VI Chip: 2017 2016 2015 Risk-free interest rate 1.9 % 1.7 % 2.1 % Expected dividend yield — — — Expected volatility 32 % 34 % 37 % Expected lives (years) 6.5 6.5 6.5 Picor: 2017 2016 2015 Risk-free interest rate 1.9 % 1.5 % 1.9 % Expected dividend yield — — — Expected volatility 48 % 42 % 41 % Expected lives (years) 6.5 6.5 6.5 Risk-free interest rate: Vicor zero-coupon Picor and VI Chip Expected dividend yield: Vicor Picor and VI Chip Expected volatility: Vicor Picor VI Chip Expected term: Vicor Picor and VI Chip Forfeiture rate: The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term “forfeitures” is distinct from “cancellations” or “expirations” and represents only the unvested portion of the surrendered option. The forfeiture analysis is re-evaluated Vicor Picor VI Chip Vicor Stock Options A summary of the activity under the 2000 Plan as of December 31, 2017 and changes during the year then ended, is presented below (in thousands except for share and weighted-average data): Options Weighted- Weighted- Aggregate Outstanding on December 31, 2016 1,696,222 $ 8.82 Granted 96,322 $ 18.41 Forfeited and expired (25,087 ) $ 10.92 Exercised (401,540 ) $ 8.21 Outstanding on December 31, 2017 1,365,917 $ 9.63 6.21 $ 15,409 Exercisable on December 31, 2017 707,244 $ 8.01 5.82 $ 9,116 Vested or expected to vest as of December 31, 2017(1) 1,332,671 $ 9.54 6.19 $ 15,161 (1) In addition to the vested options, the Company expects a portion of the unvested options to vest at some point in the future. The number of options expected to vest is calculated by applying an estimated forfeiture rate to the unvested options. As of December 31, 2016 and 2015 the Company had options exercisable for 730,388 and 565,861 shares respectively, for which the weighted average exercise prices were $7.74 and $7.24, respectively. During the years ended December 31, 2017, 2016, and 2015 under all plans, the total intrinsic value of Vicor options exercised (i.e., the difference between the market price at exercise and the price paid by the employee to exercise the options) was $4,395,000, $1,392,000 and $928,000, respectively. The total amount of cash received by the Company from options exercised in 2017, 2016, and 2015, was $3,295,000, $1,572,000, and $805,000, respectively. The total grant-date fair value of stock options that vested during the years ended December 31, 2017, 2016, and 2015 was approximately $774,000, $365,000, and $1,194,000, respectively. As of December 31, 2017, there was $920,000 of total unrecognized compensation cost related to unvested non-performance The weighted-average fair value of Vicor options granted was $8.71, $4.94, and $6.76, in 2017, 2016, and 2015, respectively. Picor Stock Options A summary of the activity under the 2001 Picor Plan as of December 31, 2017 and changes during the year then ended, is presented below (in thousands except for share and weighted-average data): Options Weighted- Weighted- Aggregate Outstanding on December 31, 2016 9,530,987 $ 0.62 Granted 673,000 $ 0.62 Forfeited and expired (126,000 ) $ 0.73 Exercised (12,000 ) $ 0.41 Outstanding on December 31, 2017 10,065,987 $ 0.62 3.80 $ 493 Exercisable on December 31, 2017 8,384,987 $ 0.61 3.31 $ 400 Vested or expected to vest as of December 31, 2017(1) 9,996,810 $ 0.62 3.78 $ 492 (1) In addition to the vested options, the Company expects a portion of the unvested options to vest at some point in the future. Options expected to vest is calculated by applying an estimated forfeiture rate to the unvested options. As of December 31, 2016 and 2015, Picor had options exercisable for 7,915,219 and 8,053,490 shares, respectively, for which the weighted average exercise prices were $0.62 and $0.64, respectively. During the years ended December 31, 2017, 2016 and 2015, the total intrinsic value of Picor options exercised was $3,000, $24,000 and $72,000, respectively. The total amount of cash received by Picor from options exercised in 2017, 2016 and 2015 was $5,000, $17,000 and $14,000, respectively The total grant-date fair value of stock options that vested during the years ended December 31, 2017, 2016, and 2015 was approximately $180,000, $155,000, and $39,000, respectively. As of December 31, 2017, there was $322,000 of total unrecognized compensation cost related to unvested share-based awards for Picor. That cost is expected to be recognized over a weighted-average period of 3.1 years for all Picor awards. The expense will be recognized as follows: $117,000 in 2018, $83,000 in 2019, $61,000 in 2020, $45,000 in 2021, and $16,000 in 2022. The weighted-average fair value of Picor options granted was $0.27 in 2017, $0.26 in 2016, and $0.48 in 2015. VI Chip Stock Options A summary of the activity under the 2007 VI Chip Plan as of December 31, 2017 and changes during the year then ended, is presented below (in thousands except for share and weighted-average data): Options Weighted- Weighted- Aggregate Outstanding on December 31, 2016 9,933,750 $ 1.00 Granted 9,771,500 $ 0.96 Forfeited and expired (6,613,000 ) $ 1.00 Exercised — $ — Outstanding on December 31, 2017 (1) 13,092,250 $ 0.97 5.78 $ — Exercisable on December 31, 2017 810,700 $ 1.00 4.46 $ — Vested or expected to vest as of December 31, 2017(2) 11,210,701 $ 0.97 5.67 $ — (1) Of the total VI Chip options outstanding on December 31, 2017, 5,500,000 options had been granted to Dr. Vinciarelli, the Company’s Chief Executive Officer. (2) In addition to the vested options, the Company expects a portion of the unvested options to vest at some point in the future. Options expected to vest is calculated by applying an estimated forfeiture rate to the unvested options. As of December 31, 2016 and 2015, VI Chip had options exercisable for 7,074,650 and 7,042,600 shares, respectively, for which the weighted average exercise price was $1.00. There were no VI Chip options exercised in 2017 and 2016. The total intrinsic value of VI Chip options exercised in 2015 was zero. The total amount of cash received by VI Chip from options exercised in 2015 was $1,000. The total grant-date fair value of stock options that vested during the years ended December 31, 2017, 2016, and 2015 was approximately $2,900,000, $0, and $1,000, respectively. As of December 31, 2017, there was $2,395,000 of total unrecognized compensation cost related to unvested share-based awards for VI Chip. That cost is expected to be recognized over a weighted-average period of 4.0 years for all VI Chip awards. The expense will be recognized as follows: $603,000 in 2018, $544,000 in 2019, $503,000 in 2020, $483,000 in 2021, and $262,000 in 2022. The weighted-average fair value of VI Chip options granted was $0.29, $0.01, and $0.01 in 2017, 2016, and 2015, respectively. 401(k) Plan The Company sponsors a savings plan available to all domestic employees, which qualifies under Section 401(k) of the Internal Revenue Code. Employees may contribute to the plan in amounts representing from 1% to 80% of their pre-tax Stock Bonus Plan Under the Company’s 1985 Stock Bonus Plan, as amended, shares of Common Stock may be awarded to employees from time to time as determined by the Board of Directors. On December 31, 2017, 109,964 shares were available for further award. All shares awarded to employees under this plan have vested. No further awards are contemplated under this plan at the present time. |