Hyperscale Data, Inc.GPUS
Hyperscale Data, Inc. Stock Compensation Disclosure
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12
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STOCKHOLDERS’ EQUITY
Preferred Stock
There are authorized Preferred stock in the amount of
500,000
shares of Series A cumulative Redeemable Convertible Preferred shares ("Series A"), and an additional 1,500,000
Preferred shares that have been authorized, but the rights, preferences, privileges and restrictions on these shares have not been determined. The Company’s Board of Directors is authorized to create a new series of preferred shares and determine the number of shares, as well as the rights, preferences, privileges and restrictions granted to or imposed upon any series of preferred shares. As of December
31,
2016,
there were no preferred shares issued or outstanding.Common Stock
Common stock confer upon the holders the rights to receive notice to participate and vote in the general meeting of shareholders of the Company, to receive dividends, if and when declared, and to participate in a distribution of surplus of assets upon liquidation of the Company.
On
November
15,
2016,
the Company entered into subscription agreements (the “Subscription Agreements”) with nine
accredited investors. Pursuant to the terms of the Subscription Agreements, the Company sold 901,666
units (“Units”) at $0.60
for an aggregate purchase price of approximately $541,000.
Each unit consists of one
share of common stock and one
warrant to purchase one
share of common stock (the “Warrant Shares”) at an exercise price of $0.80.
According to the agreement, the Company registered all of the shares of common stock then issued as part of the Units and Warrant Shares then issued and issuable upon exercise of the Warrant Shares. The Subscription Agreement provides that, until
November
15,
2017,
Investors who purchased at least $100,000
have the right to participate in the purchase of up to 50%
of the securities offered by the Company in any future financing transactions, with limited exceptions.The Warrants entitle the holders to purchase, in the aggregate, up to
901,666
shares of Common Stock at an exercise price of $0.80
per share for a period of three
years. The Warrant Shares are exercisable upon the six
month anniversary of the issuance date. The exercise price of the Warrant Shares is subject to adjustment for stock splits, stock dividends, combinations and other standard anti-dilution events. The Warrant Shares may
be exercised for cash or, upon the failure to maintain an effective registration statement, on a cashless basis.The Warrant Shares do not require a net cash-settlement or provide the holder with a choice of net-cash settlement. The Warrant Shares also do not contain a variable settlement provision. Accordingly, the Company classified the Warrant Shares as equity instruments.
Stock Option Plans
Under the Company's Digital Power
2016
and 2012
(As Amended) ("Incentive Share Option Plan"), options may
be granted to employees, officers, consultants, service providers and directors of the Company. As of
December
31,
2016,
the Company authorized according to the Incentive Share Option Plan the grant of options to officers, management, other key employees and others of up to 5,372,630
options for the Company's common stock. The maximum term of the options is ten
years from the date of grant. As of December
31,
2016,
an aggregate of 3,322,630
of the Company's options are still available for future grant.The options granted generally become fully vested after
four
years. Any options that are forfeited or cancelled before expiration become available for future grants.The options outstanding as of
December
31,
2016
have been classified by exercise price, as follows:| Exercise Price | Options Outstanding as of December 31, 2016 | Weighted Average Remaining Contractual Term (Years) | Weighted Average Exercise Price | Option Exercisable as of December 31, 2016 | Weighted Average Exercise Price of Options Exercisable | |||||||||||||||||
| $0.65 | - | $0.70 | 1,865,000 | 9.76 | $ | 0.67 | 996,667 | $ | 0.66 | |||||||||||||
| $1.10 | - | $1.32 | 25,000 | 6.84 | $ | 1.28 | 15,000 | $ | 1.25 | |||||||||||||
| $1.51 | - | $1.69 | 366,000 | 5.57 | $ | 1.60 | 316,000 | $ | 1.59 | |||||||||||||
2,256,000 | 9.05 | $ | 0.83 | 1,327,667 | $ | 0.89 | ||||||||||||||||
The total stock-based compensation expense related to all of the Company’s equity based awards, including non-employee options recognized for the years ended
December
31,
2016
and 2015
is comprised as follows:| 2016 | 2015 | |||||||
| Cost of revenues | $ | 6 | $ | 7 | ||||
| Engineering and product development | 17 | 20 | ||||||
| Selling and marketing | 5 | 6 | ||||||
| General and administrative | 492 | 193 | ||||||
| Total stock-based compensation | $ | 520 | $ | 226 | ||||
A summary of option activity under the Company's stock option plans as of
December
31,
2016
and 2015
and changes during the years then ended are as follows:| Amount of Options | Weighted Average Exercise Price | Weighted Average remaining Contractual Term (Years) | Aggregate Intrinsic Value | |||||||||||||
| Balance at January 1, 2015 | 1,262,763 | $ | 1.57 | 7.65 | ||||||||||||
| Granted | 155,000 | 0.67 | ||||||||||||||
| Forfeited | (261,000 | ) | 1.29 | |||||||||||||
| Expired | (10,763 | ) | 0.70 | |||||||||||||
| Balance at December 31, 2015 | 1,146,000 | 1.52 | 6.74 | |||||||||||||
| Granted | 1,800,000 | 0.67 | ||||||||||||||
| Forfeited | (650,000 | ) | 1.59 | |||||||||||||
| Expired | (40,000 | ) | 1.16 | |||||||||||||
| Balance outstanding at December 31, 2016 | 2,256,000 | $ | 0.83 | 9.08 | $ | - | ||||||||||
| Exercisable at December 31, 2016 | 1,327,667 | $ | 0.89 | 8.64 | $ | - | ||||||||||
The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company's closing stock price on
December
31,
2016,
$0.65
and the exercise price, multiplied by the number of in-the-money-options). As of
December
31,
2016,
there was $492
of unrecognized compensation cost related to non-vested stock-based compensation arrangements granted under the Company's stock option plans. That cost is expected to be recognized over a weighted average period of 1.81
years.Options Issued to Non-Employees
As of
December
31,
2015,
the Company's had options outstanding to purchase 142,500
shares of common stock to non-employees. During the year ended December
31,
2016,
options to purchase 102,500
shares of common stock were forfeited and 40,000
options were expired.Warrants
Warrants Issued to Executive Officer
In connection with executive employment agreement, on
November
3,
2016,
the Company issued to its Chief Executive Officer a ten
-year warrant to purchase 317,460
shares of the Company's common stock (the "Warrant "), at an exercise price of $0.01
per share subject to vesting. The Warrant shall be subject to vesting of which warrants to purchase 39,682
shares shall vest beginning on January
1,
2017,
and on the first
date of each quarter thereafter through July
1,
2018,
with warrants to purchase 39,686
shares to vest on October
1,
2018.
The fair value of the Warrant using the Black-Scholes option pricing model was $188,
which was amortized ratably over a period of two
years out of which $23
was recorded as stock-based compensation in general and administrative expenses during the year ended December
31,
2016
.
| Amount of Warrants | Weighted Average Exercise Price | Weighted Average remaining Contractual Term (Years) | Aggregate Intrinsic Value | |||||||||||||
| Balance at January 1, 2016 | - | - | - | - | ||||||||||||
| Granted | 317,460 | $ | 0.01 | |||||||||||||
| Forfeited | - | |||||||||||||||
| Expired | ||||||||||||||||
| Balance outstanding at December 31, 2016 | 317,460 | $ | 0.01 | 9.8 | $ | 203 | ||||||||||
| Exercisable at December 31, 2016 | - | - | - | |||||||||||||
The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company's closing stock price on
December
31,
2016,
$0.65
and the exercise price, multiplied by the number of in-the-money warrants).About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.