SEC Info - Heelys, Inc. - ‘10-K’ for 12/31/11

13. STOCK-BASED COMPENSATION

In June 2006, the Company adopted the 2006 Stock Incentive Plan which was amended and restated on May 20, 2010 (the “2006 Plan”). The purpose of the 2006 Plan is to provide certain key employees, non-employee directors and consultants with a proprietary interest in the Company through the granting of stock options and awards of restricted stock units.

The Company has reserved 2,972,725 shares of common stock subject to the 2006 Plan and as of December 31, 2011 had 358,546 shares remaining available that may be granted to employees, consultants and nonemployee directors of the Company in the future. The 2006 Plan is administered by the compensation committee of the Company's board of directors, which selects the persons to whom awards will be granted, determines the number of shares to be subject to each grant, and prescribes the other terms and conditions of each grant, including performance criteria, the type of consideration to be paid to the Company upon exercise and the vesting schedule. Unless specifically provided otherwise in an individual award agreement under the 2006 Plan, if a change in control of the Company, as defined by the 2006 Plan, occurs, (a) all of the options issued under the 2006 Plan will accelerate and become fully vested and exercisable and (b) the forfeiture restrictions under the restricted unit award agreement may lapse and the unvested restricted stock units may become vested and released from the forfeiture restrictions under such award only if the change in control constitutes a “change in control” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended.

Stock Options

Stock option awards are generally granted with an exercise price equal to the market price of the Company's stock at the date of grant, generally vest over four years of continuous service and have a 10-year contractual life. Stock-based compensation is based on the estimated fair value of the award on the date of grant. The Company recognizes this expense using the straight-line method over the period during which an employee is required to provide service in exchange for the award-the requisite service period. No compensation expense is recognized for stock options for which employees do not, or are not expected to, render the requisite service.

The following summarizes stock option grants made by the Company during 2010 and 2011:

Date of Grant	Number of Shares Granted		Exercise Price
March 2010		40,000	$	2.47
August 2010		82,000	$	2.36
December 2010		20,000	$	3.37
February 2011		22,500	$	2.90
December 2011		10,000	$	1.94

The exercise price per share was the fair value of the underlying stock at the grant date. All options granted vest and become exercisable in four equal cumulative installments on each successive anniversary date of the grant and have a contractual term of ten years.

The Company computed the fair value of the options granted using the Black-Scholes option pricing model and the following assumptions:

	March			August			December			February			December
	2010			2010			2010			2011			2011
Expected volatility		50.16	%		50.16	%		49.41	%		49.41	%		50.21	%
Dividend yield		-			-			-			-			-
Risk-free interest rate		3.14	%		2.00	%		2.62	%		2.84	%		1.41	%
Expected life (years)		6.25			6.25			6.25			6.25			6.25

The Company estimated the volatility of the underlying common stock at the date of grant based on the historical volatility of the Company's common stock as well as the historical volatility of comparable public companies. The risk-free interest rate for periods within the contractual life of the options is based on the U.S. Treasury yield curve in effect at the time of grant. Expected life was calculated using a simplified method as allowed by ASC 718, "Stock Compensation," due to lack of relevant historical data.

The following summarizes stock option transactions for the year ended December 31, 2011:

Options	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2010		1,520,713	$	3.76		6.8	$	312,460
Granted		32,500	$	2.60
Exercised		-		-
Forfeited		34,496	$	4.79
Outstanding at December 31, 2011		1,518,717	$	3.71		5.9	$	-
Exercisable at December 31, 2011		1,182,217	$	4.01		5.3	$	-
Vested at December 31, 2011		1,182,217	$	4.01		5.3	$	-
Unvested at December 31, 2011		336,500	$	2.64		8.0	$	-

Intrinsic value is the amount by which the fair value of the underlying stock exceeds the exercise price of an option. If the fair value of the underlying stock is less than the exercise price of an option, there is no intrinsic value.

No options were exercised during 2011 or 2010.

The weighted average fair value of options granted during the years ended December 31, 2011 and 2010 was $1.04 and $1.27, respectively.

The total fair value of shares that vested during 2011 and 2010 was $276,000 and $488,000, respectively.

Stock-based compensation expense attributable to stock option awards was $268,000 and $386,000 for the years ended December 31, 2011 and 2010, respectively.

The remaining unrecognized compensation expense related to unvested awards at December 31, 2011 is $373,000 and the weighted-average period of time over which this expense will be recognized is 2.0 years.

The Company has not capitalized any stock-based compensation expense at December 31, 2011 or 2010. There have been no significant modifications to stock option awards during 2011 or 2010.

All unvested options at December 31, 2011 are expected to vest.

Restricted Stock Units

Restricted stock units outstanding as of December 31, 2011 were awarded to certain employees in 2010 and 2011. Restricted stock units were awarded by the board of directors of the Company, upon recommendation of the compensation committee of the board of directors of the Company, and are designated as performance awards subject to the terms and conditions of the 2006 Plan and the underlying award agreements. To support the Company's focus on creating long-term stockholder value, the awarded restricted stock units are subject to performance criteria based on earnings per share of the Company (“EPS”) during the defined performance period. EPS will be determined by dividing the Company's consolidated net income or loss by the number of basic common shares of the Company outstanding during the defined performance years within the defined performance period. The calculation of the number of restricted stock units that will vest at the end of the defined performance period is based on an average of the EPS performance level achieved during each of the defined performance years. The number of restricted stock units earned during the defined performance period vary from 0% to 200% of the restricted stock units awarded based on EPS for each of the defined performance years in the defined performance year.

The performance period for restricted stock units granted in 2010 begins May 1, 2010 and ends December 31, 2012. EPS will be determined by dividing the Company's consolidated net income or loss by the number of basic common shares of the Company for the period May 1, 2010 through December 31, 2010 and each of the twelve-month periods beginning January 1 and ending December 31 for 2011 and 2012 (each, a performance year).

The performance period for restricted stock units granted in 2011 begins January 1, 2011 and ends December 31, 2013. EPS will be determined by dividing the Company's consolidated net income or loss by the number of basic common shares of the Company for each of the twelve-month periods beginning January 1 and ending December 31 for 2011, 2012 and 2013 (each, a performance year).

If, at the end of the defined performance period, at least threshold performance level has been achieved, the earned restricted stock units will vest and common stock of the Company will be issued. The number of shares of common stock of the Company awarded will be based on the fair market value of the Company's common stock on the date of grant ($2.36 for restricted stock units granted in 2010 and $2.19 for restricted stock units granted in 2011).

The following summarizes restricted stock unit transactions for the year ended December 31, 2011:

	Performance Units			Weighted Average Grant-Date Fair Value
Outstanding at December 31, 2010		127,119		$	2.36
Granted		652,968		$	2.19
Forfeited		226,802		$	2.24
Earned & Converted		-		$	-
Outstanding at December 31, 2011		553,285	(1)	$	2.21

(1)

Assuming maximum payout for remaining performance years.

The Company determines the fair value of restricted stock unit awards based on the closing trade price of the Company's common stock on the date of grant. Compensation expense is recognized using the straight-line method over the performance period. The amount of compensation expense recognized is based upon the estimated number of restricted stock units expected to be earned. The Company reassesses this estimate at each reporting period and adjusts the total amount of compensation expense to be recognized accordingly.

For restricted stock units granted in 2010, threshold performance for the period May 1, 2010 through December 31, 2010, and for the period January 1, 2011 through December 31, 2011, were not achieved and, based on assumptions as of December 31, 2011, the Company estimated that threshold performance would not be achieved for the remaining defined performance year and that none of the awarded restricted stock units would be earned and as a result no compensation expense has been recognized in 2011 or 2010.

As of December 31, 2011, the Company estimates that 228,311 of the restricted stock units granted in 2011 will be earned (total compensation expense of $500,000). The Company has recognized $167,000 of compensation expense in 2011 related to these restricted stock unit awards.

As of December 31, 2011, the maximum number of restricted stock units granted in 2010 and 2011 that might be earned is 63,559 and 489,726, respectively.

This ‘10-K’ Filing	Date	Other Filings

	12/31/13
	12/31/12
Filed on:	3/21/12	S-3
For Period end:	12/31/11
	1/1/11
	12/31/10	10-K
	5/20/10	8-K, DEF 14A
	5/1/10
	9/15/09
		List all Filings

Heelys, Inc. – ‘10-K’ for 12/31/11 – ‘R19’

On: Wednesday, 3/21/12, at 3:56pm ET · For: 12/31/11 · Accession #: 1140361-12-16912 · File #: 1-33182

Previous ‘10-K’: ‘10-K’ on 3/10/11 for 12/31/10 · Latest ‘10-K’: This Filing

Annual Report — Form 10-K — Sect. 13 / 15(d) – SEA’34
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‘R19’ — Stock-Based Compensation

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