Stock Incentive Plan and Stock-Based Compensation

6 Months Ended

Jun. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Incentive Plan and Stock-Based Compensation

Note 7. Stock incentive plan and stock–based compensation

Stock incentive plan

The Company’s board of directors established the 2012 Stock Incentive Plan (the “Plan”) on April 15, 2012, and the Company’s shareholders ratified the Plan at the annual meeting of the Company’s stockholders on May 30, 2012. The Company has 415,000 shares of Common Stock that are reserved to grant Options, Stock Awards and Performance Shares (collectively the “Awards”) to “Participants” under the Plan. The Plan is administered by the board of directors or the Compensation Committee of the board of directors, which determines the individuals to whom awards shall be granted as well as the type, terms and conditions of each award, the option price and the duration of each award.

At the annual meeting of the stockholders of MGT held on September 27, 2013, stockholders approved an amendment to the Plan (the “Amended and Restated Plan”) to increase the amount of shares of Common stock that may be issued under the Amended and Restated Plan to 1,335,000 shares from 415,000 shares, an increase of 920,000 shares and to add a reload feature.

At the annual meeting of the stockholders of MGT held on December 31, 2015, stockholders approved an amendment to the Plan (the “Amended and Restated Plan”) to increase the amount of shares of Common stock that may be issued under the Amended and Restated Plan to 3,000,000 shares from 1,335,000 shares, an increase of 1,665,000 shares.

Common Stock and options granted under the Plan vest as determined by the Company’s Compensation and Nominations Committee and expire over varying terms, but not more than seven years from date of grant. In the case of an Incentive Stock Option that is granted to a 10% shareholder on the date of grant, such Option shall not be exercisable after the expiration of five years from the date of grant. No option grants were issued during the six months ended June 30, 2016, and 2015.

Issuance of restricted shares – directors, officers and employees

	Number of shares			Weighted average grant date fair value
Non–vested at December 31, 2015		–		$	–
Granted		1,051,000			2.68
Vested		(51,000	)		2.68
Forfeited		–			–
Non–vested at June 30, 2016		1,000,000		$	2.68

For the three months ended June 30, 2016 and 2015, the Company has recorded $248 and $32, respectively, in employee and director stock–based compensation expense, which is a component of selling, general and administrative expense in the condensed consolidated statement of operations. For the six months ended June 30, 2016 and 2015, the Company has recorded $248 and $64, respectively, in employee and director stock–based compensation expense, which is a component of selling, general and administrative expense in the condensed consolidated statement of operations.

In the three and six months ended June 30, 2016 and 2015, the Company did not allocate any stock–based compensation expense to non–controlling interest.

Unrecognized compensation cost

As of June 30, 2016, unrecognized compensation costs related to non–vested stock–based compensation arrangements was $2,214 (2015: $29), and is expected to be recognized over a weighted average period of 2 years (2015: 0.52 years).

Stock–based compensation – non–employees

For the six months ended June 30, 2016 the Company granted and issued a total of 740,000 shares to non–employees for services rendered. The shares were recorded at $1,165 using the closing market value on respective dates of issuance.

Warrants

In May 2016, the Company entered into Warrant Modification Agreements (the “$3 Warrant Modification Agreements”) with holders of 517,796 of Common Stock Purchase Warrants issued in connection with the Company’s private placement offering dated May 24, 2012. The warrants entitled its holders to purchase the Company’s Common stock at an exercise price of $3 per Company share for a period of five years from the date of issuance (the “$3 Warrants”). Under the terms of the $3 Warrant Modification Agreements, the exercise price of the $3 Warrants was reduced to $0.25 per share. During the three months ended June 30, 2016, the Company issued 517,796 shares of Common stock for gross proceeds of $129 in connection with exercise of the $3 Warrants and recorded a Warrant modification expense of $431 related to the $3 Warrant Modification Agreements.

Also in May 2016, the Company entered into agreements with the holders of 2,800,000 Common Stock Purchase Warrants issued in connection with the Company’s private placement offering dated October 8, 2015 (the “2015 Warrants”). Pursuant to its terms, each 2015 Warrant entitled the holder to purchase two shares of Company’s Common stock at a price of $0.25 per share on the earlier of: (i) one year from the date of issue, or (ii) the occurrence of certain corporate events, including a private or public financing in which the Company receives gross proceeds of at least $7,500,000; a spinoff; one or more acquisitions or sales by the Company of certain assets approved by the stockholders of the Company; or a merger, consolidation, recapitalization, or reorganization approved by the stockholders of the Company (each, a “Qualifying Transaction”). In the absence of a Qualifying Transaction, the Company allowed holders of the 2015 Warrants to accelerate exercise, if the holder agreed to pay an exercise price of greater than $0.25 per share. All 2015 Warrants were exercised under this agreement, with the Company issuing a total of 5,600,000 shares of Common stock for gross proceeds of $2,298, or approximately $0.41 per share. Due to the gain, no income statement impact was recorded as a result of the above exercises.

During the three months ended June 30, 2016 the Company issued a total of 6,117,796 shares of Common stock in connection with exercise of warrants, resulting in gross proceeds of $2,427.

As of June 30, 2016 the Company had 100,000 warrants outstanding at a weighted average exercise price of $3.75 and an intrinsic value of $7. All issued warrants are exercisable and expire through 2018.