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v2.4.0.6
Stock-based Compensation
9 Months Ended
Sep. 30, 2011
Stock-based Compensation [Abstract]  
Stock-based Compensation

12. Stock-based Compensation

The Company measures the stock-based compensation costs of share-based compensation arrangements based on the grant-date fair value and recognizes the costs in the financial statements over the employee requisite service period.

The following table summarizes the consolidated stock-based compensation expense, by type of awards for the three and nine months ended September 30, 2011 and 2010 (in thousands):

 

                                 
    For Three Months Ended     For Nine Months Ended  
    September 30,
2011
    September 30,
2010
    September 30,
2011
    September 30,
2010
 

Employee stock options

  $ 127     $ 26     $ 269     $ 207  

Stock grants

    192       8       200       24  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total stock-based compensation expense

  $ 319     $ 34     $ 469     $ 231  
   

 

 

   

 

 

   

 

 

   

 

 

 

The following table summarizes the consolidated stock-based compensation by line item for the three and nine months ended September 30, 2011 and 2010 (in thousands):

 

                                 
    For Three Months Ended     For Nine Months Ended  
    September 30,
2011
    September 30,
2010
    September 30,
2011
    September 30,
2010
 

General and administrative

  $ 296     $ 10     $ 414     $ 109  

Sales, marketing and customer service

    20       17       45       67  

Engineering, design and product management

    3       7       10       55  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total stock-based compensation

  $ 319     $ 34     $ 469     $ 231  
   

 

 

   

 

 

   

 

 

   

 

 

 

Stock-based compensation expense recognized in the consolidated statements of operations is based on awards ultimately expected to vest. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company estimated its average pre-vesting forfeiture rate at 18.3% and 22.5% for the nine months ended September 30, 2011 and 2010, respectively.

Valuation Assumptions

Valuation and Amortization Method — The Company estimates the fair value of service-based and performance-based stock options granted using the Black-Scholes-Merton option-pricing formula. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Service-based and performance-based options typically have a five-year life from date of grant and vesting periods of three to four years.

Expected Term — The Company’s expected term represents the period that the Company’s stock-based awards are expected to be outstanding. For awards granted subject only to service vesting requirements, the Company utilizes the simplified method for estimating the expected term of the stock-based award, instead of historical exercise data. For its performance-based awards, the Company has determined the expected term to be five years based on contractual life and the seniority of the recipient.

Expected Volatility — The Company uses the historical volatility of the price of its common shares.

Expected Dividend — The Company has never paid dividends on its common shares and currently does not intend to do so and, accordingly, the dividend yield percentage is zero for all periods.

Risk-Free Interest Rate — The Company bases the risk-free interest rate used in the Black-Scholes-Merton valuation method upon the implied yield curve currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term used as the assumption in the model.

 

During the three months ended September 30, 2011, the Company granted 190,000 service-based options fair-valued between $0.36 and $0.38 per option using the Black-Scholes-Merton model and issued 400,000 shares of restricted common stock fair-valued at $0.48, the closing price of the Company’s common stock on the date of grant. Vesting for 150,000 options will occur over four years beginning on the first anniversary of the grant, 40,000 options and 400,000 shares of restricted stock vested upon grant. During the nine months ended September 30, 2011, the Company granted 3,890,000 service-based options fair-valued between $0.36 and $0.47 per option using the Black-Scholes-Merton model and 400,000 shares of restricted common stock fair-valued at $0.48, the closing price of the Company’s common stock on the date of grant. The vesting for 3,850,000 options will occur over a four-year period beginning one year from the date of grant and the remaining 40,000 options and the 400,000 shares of restricted common stock vested upon grant. During the three months ended September 30, 2010, no options or restricted stock were granted. During the nine months ended September 30, 2010, the Company granted 805,000 service-based options fair-valued between $0.24 and $0.52 per option using the Black-Scholes-Merton model. There were no restricted stock grants during the nine months ended September 30, 2010. The vesting for 705,000 of the options will occur over a four-year period beginning one year from the date of grant and the vesting period for 100,000 of the options will occur over a one-year period beginning on the date of grant.

Assumptions used in the determination of the fair value of share-based payment awards using the Black-Scholes-Merton model for stock option grants during the three and nine months ended September 30, 2011 and 2010 were as follows:

 

                 
    2011
Service-based
    2010
Service-based
 

Expected term

    3.0 - 3.75       3.0 - 3.75  

Risk-free interest rate

    0.94% - 1.53     1.47

Volatility

    132% - 201     54

Dividend yield

    0     0

Equity Incentive Plan

At September 30, 2011 there were 16,855,220 total shares available under the plan (9% of the outstanding shares of 184,413,923 plus outstanding warrants of 2,866,302). There were 6,326,043 options and restricted shares issued and outstanding under the plan; 164,195 options have been exercised; and 10,364,982 shares are available to be granted under the plan.

The following table summarizes the Company’s stock option activities for the three and nine month periods ended September 30, 2011 and 2010:

 

                                                                 
    2011     2010  
    Shares     Weighted-
Average
Exercise Price
Per Share
    Weighted-
Average
Remaining
Contractual Term
    Aggregate
Intrinsic
Value ($000)
    Shares     Weighted-
Average
Exercise Price
Per Share
    Weighted-
Average
Remaining
Contractual
Term
    Aggregate
Intrinsic Value
($000)
 

Outstanding January 1

    2,505,175     $ 0.92       2.99     $ —         2,694,400     $ 1.20       2.80     $ 80,832  

Granted

    —         —         —         —         805,000       1.24       4.76       —    

Exercised

    —         —         —         —         —         —         —         —    

Forfeited

    (25,000     0.55       —         —         (202,500     1.00       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Outstanding March 31

    2,480,175       0.91       2.75       —         3,296,900       1.22       3.18       197,814  

Granted

    3,700,000       0.49       3.75       —         —         —         —         —    

Exercised

    —         —         —         —         —         —         —         —    

Forfeited

    (650,000             —         —         (10,000     1.00       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Outstanding June 30

    5,530,175       0.68       3.84       —         3,286,900       1.22       2.93       —    

Granted

    190,000       0.48       3.75       —         —         —         —         —    

Exercised

    —         —         —         —         —         —         —         —    

Forfeited

    (320,000     0.42       —         —         (587,500     1.31       —       $ —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Outstanding September 30

    5,400,175     $ 0.71       3.63     $ —         2,699,400     $ 1.20       2.48     $ —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Exercisable September 30

    1,214,925     $ 1.08       1.34     $ —         1,757,525     $ 1.26       2.48     $ —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The weighted-average grant-date fair value of the options granted during the three months ended September 30, 2011 was $0.37. The weighted-average grant-date fair value of the options granted during the nine months ended September 30, 2011 was $0.42. The weighted-average grant-date fair value of options granted during the three and nine months ended September 30, 2010 was $0.48.

 

The following table summarizes the Company’s restricted stock activities for the three and nine month periods ended September 30, 2011 and 2010:

 

                 
    2011     2010  
    Shares  

Outstanding as of January 1

    550,868       550,868  

Granted

    —         —    

Exercised

    —         —    

Forfeited

    (25,000     —    
   

 

 

   

 

 

 

Outstanding March 31

    525,868       550,868  

Granted

    —         —    

Exercised

    —         —    

Forfeited

    —         —    
   

 

 

   

 

 

 

Outstanding June 30

    525,868       550,868  

Granted

    400,000       —    

Exercised

    —         —    

Forfeited

    —         —    
   

 

 

   

 

 

 

Outstanding September 30

    925,868       550,868  
   

 

 

   

 

 

 

Vested as of September 30

    925,868       500,868  
   

 

 

   

 

 

 

Changes in the Company’s non-vested stock awards are summarized as follows:

 

                                                 
    Service-based Options     Performance-based Options     Restricted Stock  
    Shares     Weighted-
Average
Grant Date
Fair Value
Per Share
    Shares     Weighted-
Average
Grant Date
Fair Value
Per Share
    Shares     Weighted-
Average
Grant Date
Fair Value
Per Share
 

Non-vested as of January 1, 2011

    1,334,125     $ 0.78       —       $ —         25,000     $ 1.34  

Granted

    —         —         —         —         —         —    

Vested

    (140,375     0.29       —         —         —         —    

Forfeited

    (25,000     0.59       —         —         (25,000     1.34  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-vested as of March 31, 2011

    1,168,750       0.74       —         —         —         —    

Granted

    3,700,000       0.46       —         —         —         —    

Vested

    (69,750     0.68       —         —         —         —    

Forfeited

    (650,000     0.39       —         —         —         —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-vested as of June 30, 2011

    4,149,000       0.54       —         —         —         —    

Granted

    190,000       0.42       —         —         400,000       0.48  

Vested

    (77,500     0.49       —         —         (400,000     (0.48

Forfeited

    (76,250     0.42       —         —         —         —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-vested as of September 30, 2011

    4,185,250     $ 0.53       —       $ —         —       $ —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of September 30, 2011, there was $1,346,000, $0 and $0 of unrecognized compensation cost related to non-vested service-based options, performance-based options and restricted stock grants, respectively. The cost is expected to be recognized over a weighted-average of 3.63 years for service-based options. Performance-based options are fully vested. During the nine months ended September 30, 2011 there were no changes to the contractual life of any fully vested options.