Equity-Based Compensation

Glowpoint 2014 Stock Incentive Plan

On April 22, 2014, the Board of Directors of the Company (the “Board”) adopted the Glowpoint, Inc. 2014 Equity Incentive Plan (the “2014 Plan”), subject to requisite stockholder approval. On May 28, 2014, the 2014 Plan was approved by the Company’s stockholders at the Company’s 2014 Annual Meeting of Stockholders. The purpose of the 2014 Plan is to promote the success of the Company and to increase stockholder value by providing an additional means to attract, motivate, retain and reward selected employees and other eligible persons through the grant of equity awards. Awards may be granted under the 2014 Plan to officers, employees, directors and consultants of the Company or its subsidiaries. The 2014 Plan permits the grant of stock options, stock appreciation rights, restricted shares, restricted stock units, cash awards and other awards, including stock bonuses, performance stock, performance units, dividend equivalents, or similar rights to purchase or acquire shares, whether at a fixed or variable price or ratio related to the Company’s common stock, upon the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions, or any combination thereof, or any similar securities with a value derived from the value of or related to the Company’s common stock and/or returns thereon. A total of 4,400,000 shares of the Company’s common stock are available for issuance pursuant to awards under the 2014 Plan. No awards were granted under the 2014 Plan during the year ended December 31, 2014.

Glowpoint 2000 Stock Incentive Plan

In June 2010, the Board terminated the Glowpoint 2000 Stock Incentive Plan (as amended, the “2000 Plan”). Notwithstanding the termination of the 2000 Plan, outstanding awards under the 2000 Plan will remain in effect accordance with their terms. As of December 31, 2014, options to purchase a total of 87,000 shares of common stock were outstanding.

Glowpoint 2007 Stock Incentive Plan

In May 2014, the Board terminated the Company’s 2007 Stock Incentive Plan (the “2007 Plan”). Notwithstanding the termination of the 2007 Plan, outstanding awards under the 2007 Plan will remain in effect accordance with their terms. As of December 31, 2014, options to purchase a total of 1,263,000 shares of common stock were outstanding.

Stock Options

The Company periodically grants stock options to employees and directors in accordance with the provisions of our stock incentive plans, with the exercise price of the stock options being set at or above the closing price of our common stock at the date of grant.

In our stock incentive plans, the exercise price of the awards are established by the administrator of the plan and, in the case of incentive stock options (“ISOs”) issued to employees who are less than 10% stockholders, the per share exercise price must be equal to at least 100% of the fair market value of a share of the common stock on the date of grant or not less than 110% of the fair market value of the shares in the case of an employee who is a 10% stockholder. The administrator of the plan determines the terms and provisions of each award granted, including the vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment, payment contingencies and satisfaction of any performance criteria.

For the year ended December 31, 2014, no options were granted, 50,000 options expired, and 50,000 options were exercised and converted into 20,000 shares of common stock. The weighted average fair value of each option granted is estimated on the date of grant using the Black-Scholes option valuation model with the weighted average assumptions during the year ended December 31, 2013 as shown in the table below. No assumptions are presented for the year ended December 31, 2014 as no options were granted during this period.



	Year Ended December 31,
	2013
Risk free interest rate	0.8%
Expected option lives	5 years
Expected volatility	103.2%
Estimated forfeiture rate	10%
Expected dividend yields	—
Weighted average grant date fair value of options	$1.39

The Company calculates expected volatility for a stock-based grant based on historic daily stock price observations of its common stock during the period immediately preceding the grant that is equal in length to the expected term of the grant. The expected term of the options and forfeiture rates are estimated based on the Company’s exercise and employment termination experience. The risk free interest rate is based on U.S. Treasury yields for securities in effect at the time of grants with terms approximating the expected life of the grants. The assumptions used in the Black-Scholes option valuation model are highly subjective and can materially affect the resulting valuations.

A summary of stock options granted, exercised, expired and forfeited under our plans and options outstanding as of, and changes made during, the years ended December 31, 2014 and 2013 (options in thousands):



	Outstanding				Exercisable
	Number of Options		Weighted Average Exercise Price		Number of Options	Weighted Average Exercise Price
Options outstanding, December 31, 2012	1,857		$	3.07	605	$	2.93
Granted	1,075		1.84
Exercised	(70	)	1.61
Expired	(14	)	13.56
Forfeited	(1,056	)	3.16
Options outstanding, December 31, 2013	1,792		$	2.21	410	$	2.71
Granted	—		—
Exercised	(50	)	0.90
Expired	(50	)	5.29
Forfeited	(342	)	2.70
Options outstanding, December 31, 2014	1,350		$	2.02	729	$	2.05

Additional information as of December 31, 2014 is as follows (options in thousands):



	Outstanding				Exercisable
Range of price	Number of Options	Weighted Average Remaining Contractual Life (In Years)	Weighted Average Exercise Price		Number of Options	Weighted Average Exercise Price
$0.90 – $1.51	175	7.67	$	1.29	85	$	1.29
$1.52 – $1.96	70	3.23	1.71		70	1.71
$1.98 – $2.05	892	7.96	1.98		438	1.98
$2.12 – $2.60	97	5.50	2.34		70	2.35
$2.68 – $7.68	116	6.32	3.29		66	3.50
	1,350	7.36	$	2.02	729	2.05

A summary of unvested options as of, and changes during the years ended December 31, 2014 and 2013, is presented below (options in thousands):



	Options		Weighted Average Grant Date Fair Value
Unvested options outstanding, December 31, 2012	1,252		$	2.27
Granted	1,075		1.39
Vested	(85	)	1.43
Forfeited	(860	)	2.25
Unvested options outstanding, December 31, 2013	1,382		$	1.57
Granted	—		—
Vested	(597	)	1.46
Forfeited	(163	)	2.20
Unvested options outstanding, December 31, 2014	622		$	1.51

Stock option compensation expense relating to stock option awards is allocated as follows for the years ended December 31, 2014 and 2013 (in thousands):



	Year Ended December 31,
	2014		2013
General and administrative	$	356	$	646
	$	356	$	646

The intrinsic value of vested options at December 31, 2014 and 2013 was $3,000 and $6,000, respectively. The intrinsic value of unvested options at December 31, 2014 and 2013 was $7,000 and $48,000, respectively. The intrinsic value of exercised options for the year ended December 31, 2014 and 2013 was $30,000 and $27,000, respectively.

The remaining unrecognized stock-based compensation expense for options at December 31, 2014 was $786,000, of which $20,000, representing 10,000 options, will only be expensed upon a “change in control” and the remaining $766,000 will be amortized over a weighted average period of approximately 1.8 years.

The tax benefit recognized for stock-based compensation for the year ended December 31, 2014 and 2013 was de minimis. No compensation costs were capitalized as part of the cost of an asset.

Restricted Stock

A summary of restricted stock granted, vested, forfeited and unvested outstanding as of, and changes made during, the years ended December 31, 2014 and 2013, is presented below (shares in thousands):



	Restricted Shares		Weighted Average Grant Price
Unvested restricted shares outstanding, December 31, 2012	1,294		$	2.43
Granted	388		1.28
Vested	(367	)	1.43
Forfeited	(850	)	2.56
Unvested restricted shares outstanding, December 31, 2013	465		$	2.03
Granted	522		1.53
Vested	(122	)	1.54
Forfeited	(224	)	2.32
Unvested restricted shares outstanding, December 31, 2014	641		$	1.61

The number of restricted shares vested during the year ended December 31, 2014 includes 40,000 shares withheld and repurchased by the Company on behalf of employees to satisfy $66,000 of minimum statutory tax withholding requirements. Such shares are held in the Company's treasury stock as of December 31, 2014.

Stock compensation expense relating to restricted stock awards are allocated as follows for the years ended December 31, 2014 and 2013 (in thousands):



	Year Ended December 31,
	2014		2013
Cost of revenue	$	36	$	40
Research and development	12		8
Sales and marketing	29		56
General and administrative	167		453
	$	244	$	557

During the year ended December 31, 2014, additional paid in capital was increased by $204,000 relating to the issuance of restricted stock for settlement of bonuses, of which $165,000 was recorded in accrued expenses as of December 31, 2013. Stock based compensation expense related to these accrued bonuses was recorded during the year ended December 31, 2013.

The remaining unrecognized stock-based compensation expense for restricted stock at December 31, 2014 was $689,000, of which $38,000, representing 15,000 shares, will only be expensed upon a “change in control” and the remaining $651,000 will be amortized over a weighted average period of 2.6 years.

The tax benefit recognized for stock-based compensation for the year ended December 31, 2014 and 2013 was de minimis. No compensation costs were capitalized as part of the cost of an asset.