Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Stock Compensation

v3.10.0.1
Stock Compensation
12 Months Ended
Dec. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock Compensation
Note L – Stock Compensation
Stock Option Plan
On May 25, 2017, the board of directors of Parent (the “Board of Directors”) further amended the Equity Incentive Plan, originally effective as of October 14, 2003, and previously amended and restated effective as of October 31, 2006, April 16, 2013, May 4, 2015 and December 21, 2015. The Amended Plan allows for the award of equity incentives, including stock options, stock appreciation rights, restricted stock awards, stock bonus awards, deferred stock awards, and other stock-based awards to certain employees, directors, or officers of, or key non-employee advisers or consultants, including contracted physicians to the Company or its subsidiaries. The Amended Plan, provides that the maximum aggregate number of shares of the Company’s common stock reserved and available for issuance under the Amended Plan is 18,650,000.
As of December 31, 2018 and 2017, stock options outstanding totaled 6.8 million and 6.3 million shares, respectively.  The outstanding options in 2017 included 200,000 options issued outside of the Amended Plan to Douglas VanOort, the Company’s Chairman and Chief Executive Officer.  As of December 31, 2018 and 2017, a total of approximately 3.3 million and 5.4 million shares, respectively, were available for future option and stock awards under the Amended Plan. Options typically expire after 5 years and generally vest over 3 or 4 years, but each grant’s expiration, vesting and exercise price provisions are determined at the time the awards are granted by the Compensation Committee of the Board of Directors.
The fair value of each stock option award granted during the years ended December 31, 2018, 2017 and 2016 was estimated as of the grant date using a trinomial lattice model with the following weighted average assumptions:
 
  2018 2017 2016
Expected term (in years) 1.6 – 4.0 3.0 – 4.5 1.0 – 4.5
Risk-free interest rate (%) 2.5  % 1.5  % 1.1  %
Expected volatility (%) 43.0  % 49.0  % 54.0  %
Dividend yield (%) 0.0  % 0.0  % 0.0  %
Weighted average fair value/share at grant date $ 2.80  $ 2.26  $ 2.23 
The status of our stock options are summarized as follows: 

 
Number
Of
Shares
Weighted
Average
Exercise
Price
Outstanding at Outstanding at December 31, 2015 5,326,505  $ 3.07 
Granted 2,617,526  7.14 
Exercised (2,483,519) 1.69 
Forfeited (324,402) 3.99 
Outstanding at Outstanding at December 31, 2016 5,136,110  5.76 
Granted 2,119,498  7.60 
Exercised (565,569) 3.84 
Forfeited (347,513) 6.12 
Outstanding at Outstanding at December 31, 2017 6,342,526  6.51 
Granted 2,457,102  9.03 
Exercised (1,570,211) 5.48 
Forfeited (390,000) 7.15 
Outstanding at Outstanding at December 31, 2018 6,839,417  7.63 
Exercisable at Exercisable at December 31, 2018 2,508,890  6.42 

The number and weighted average grant-date fair values of options non-vested at the beginning and end of 2018, as well as options granted, vested and forfeited during the year was as follows:

 
Number of
Options
Weighted
Average
Grant Date
Fair Value
Non-vested at Non-vested at December 31, 2017 4,239,185  $ 2.29 
Granted in Granted 2,457,102  2.80 
Vested in Vested (2,039,176) 2.69 
Forfeited in Forfeited (326,585) 2.97 
Non-vested at Non-vested at December 31, 2018 4,330,526  2.67 

The following table summarizes information about our options outstanding at December 31, 2018:
 
  Options Outstanding Options Exercisable
Range of
Exercise
Prices ($)
Number
Outstanding
Weighted
Average
Remaining
Contractual
Life (Years)
Weighted
Average
Exercise
Price
Number
Exercisable
Weighted
Average
Remaining
Contractual
Life (Years)
Weighted
Average
Exercise
Price
3.31 – 6.00 869,667  1.20 $ 4.68  858,000  1.19 $ 4.66 
6.01 – 7.00 289,166  2.07 6.76  151,671  2.05 6.75 
7.01 – 8.00 2,924,201  2.85 7.35  1,348,004  2.67 7.30 
8.01 – 9.00 1,949,670  4.01 8.04  114,996  2.83 7.93 
9.01 – 14.40 806,713  4.45 11.10  36,219  3.31 9.12 
  6,839,417  3.12 7.63  2,508,890  2.43 6.42 

As of December 31, 2018, the aggregate intrinsic value of all stock options outstanding and expected to vest was approximately $34.4 million and the aggregate intrinsic value of currently exercisable stock options was approximately $15.5 million. The intrinsic value of each option share is the difference between the fair market value of NeoGenomics' common stock and the exercise price of such option share to the extent it is “in-the-money”.  Aggregate intrinsic value represents the value that would have been received by the holders of in-the-money options had they exercised their options on the last trading day of the year and sold the underlying shares at the closing stock price on such day. The intrinsic value calculation is based on the $12.61
closing stock price of NeoGenomics Common Stock on December 31, 2018, the last trading day of 2018. The total number of in-the-money options outstanding and exercisable as of December 31, 2018 was approximately 2.5 million.
The total intrinsic value of options exercised during the years ended December 31, 2018, 2017 and 2016 was approximately $29.3 million, $2.8 million and $15.0 million, respectively. Intrinsic value of exercised shares is the total value of such shares on the date of exercise less the cash received from the option holder to exercise the options. The total cash proceeds received from the exercise of stock options was approximately $8.6 million, $2.2 million and $4.2 million for the years ended December 31, 2018, 2017 and 2016, respectively.
The total fair value of options granted during the years ended December 31, 2018, 2017 and 2016 was approximately $6.9 million, $4.8 million and $6.5 million, respectively. The total fair value of option shares vested during the years ended December 31, 2018, 2017 and 2016 was approximately $5.5 million, $3.6 million and $2.2 million.
We recognize stock-based compensation expense using the straight-line basis over the awards’ requisite service periods. Stock compensation expense related to stock options for the years ended December 31, 2018, 2017 and 2016 was approximately $5.4 million, $5.0 million and $5.0 million, respectively. As of December 31, 2018, there was approximately $5.1 million of total unrecognized stock-based compensation cost related to unvested stock options granted under the Amended Plan. This cost is expected to be recognized over a weighted-average period of 2.1 years.
 
Employee Stock Purchase Plan
The Company sponsors an Employee Stock Purchase Plan (“ESPP”), under which eligible employees can purchase common stock at a discount from the fair market value.  In accordance with ASC Topic 718-50, Compensation – Stock Compensation – Employee Share Purchase Plans, the ESPP was considered non-compensatory and did not require the recognition of compensation cost because the discount offered to employees did not exceed 5%.
On May 25, 2017, the Company amended the ESPP, increasing the discount from 5% to 15%.  As a result of this change, we recognized stock-based compensation expense for the year ended December 31, 2018 and 2017 in the amount of approximately $0.2 million and $0.1 million, respectively.  Shares issued pursuant to this plan were 113,503, 108,599 and 98,672 for the years ended December 31, 2018, 2017 and 2016, respectively.
Common Stock Warrants
From time to time, the Company issues warrants to purchase its common stock. These warrants have been issued for consulting services, in connection with the Company’s credit facilities and sales of its common stock and in connection with employment agreements and for compensation to directors. These warrants are valued using trinomial lattice pricing model and using the volatility, market price, strike price, risk-free interest rate and dividend yield appropriate at the date the warrants were issued.    There were no warrants outstanding as of December 31, 2017 and no warrant activity for the year ended December 31, 2018.  

Warrant activity is summarized as follows:
Shares  Weighted Average
Exercise Price
 
Warrants outstanding, December 31, 2015  650,000  $ 1.48 
Granted  —  — 
Exercised  (200,000) — 
Expired/Cancelled  —  — 
Warrants outstanding, December 31, 2016  450,000  1.50 
Granted  —  — 
Exercised  (450,000) 1.50 
Expired/Cancelled  —  — 
Warrants outstanding, December 31, 2017  —  —