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EXCEL - IDEA: XBRL DOCUMENT - Turtle Beach CorpFinancial_Report.xls
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EX-23.1 - CONSENT - Turtle Beach Corpparametric_10k-ex2301.htm
EX-32.1 - CERTIFICATION - Turtle Beach Corpparametric_10k-ex3201.htm
EX-31.1 - CERTIFICATION - Turtle Beach Corpparametric_10k-ex3101.htm
EX-21.1 - SUBSIDIARIES - Turtle Beach Corpparametric_10k-ex2101.htm
EX-10.11.1 - STOCK OPTION PLAN AMENDMENT - Turtle Beach Corpparametric_10k-ex101101.htm
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v2.4.0.6
9. Share-Based Compensation
12 Months Ended
Sep. 30, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
9. Share-Based Compensation

On September 27, 2010 the Company adopted the 2010 Stock Option Plan (the “2010 Plan”). The 2010 Plan authorized the grant of options to purchase up to 600,000 shares of the Company’s common stock to directors, officers, employees and consultants. On December 29, 2011 the Company adopted, and shareholders subsequently approved, the 2012 Stock Option Plan (the “2012 Plan”) providing the Board of Directors with authority to grant options to purchase up to 253,000 of the shares of common stock remaining available for issuance under the 2010 Plan and up to an additional 600,000 shares of common stock. The 2012 Plan replaced the 2010 Plan but awards previously granted under the 2010 Plan remain outstanding in accordance with their terms. Any outstanding awards under the 2010 Plan that expire or terminate, other than through exercise or share settlement, will also become eligible for grant under the 2012 Plan. At September 30, 2012 a total of 7,500 shares were available for grant under the 2012 Plan.

 

In June and August 2012, in connection with offers of employment to two new employees, the Board of Directors granted inducement options to purchase up to 96,000 shares of the Company’s common stock exercisable for five years and vesting over three years. Such options were granted outside of the 2012 Plan.

 

In August 2012, the Company’s Board of Directors approved, subject to shareholder approval, an amendment to the 2012 Plan, which would provide the Company an additional 500,000 shares of common stock for option issuance. Under this amendment, in September 2012 the Company’s Board of Directors granted an option to purchase 25,000 shares of the Company’s common stock to one director for services, however, the option is not considered outstanding until the amendment is approved by shareholders. No expense has been recorded for the grant and the increase in the 2012 Plan is not included in the option totals below.

 

The Company uses the Black-Scholes option pricing model to determine the estimated fair value of each option as of its grant date or any revaluation date, and the grant date fair value is recognized as non-cash based compensation expense over the expected vesting term of options. The inputs to the Black-Scholes option pricing model are subjective and generally require significant analysis and judgment to develop. The following table sets forth the significant weighted-average assumptions used in the Black-Scholes model and the calculation of stock-based compensation cost (annualized percentages):

 

Years Ended September 30,  2012   2011 
Volatility   90%    99% 
Risk-free interest rate   0.92%    1.14% 
Forfeiture rate   1.10%    0.00% 
Dividend yield   0.00%    0.00% 
Expected life in years   4.61    4.75 
Weighted average fair value of options granted   $ 3.68   $ 1.25 

 

 

The Company’s stock commenced trading in October 2010 and management estimated its expected volatility for fiscal 2011 by reviewing the historical volatility of the common stock of a group of selected peer public companies that operate in similar industries and are similar in terms of stage of development or size and then projecting this information toward future expected results. Judgment was used in selecting these companies, as well as in evaluating the available historical volatility for these peer companies. In fiscal 2012 the Company commenced using its historical volatility that did not vary significantly from prior estimates. The risk-free interest rate is based on rates published by the Federal Reserve Board. The dividend yield of zero is based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends. The Company has a small number of option grants and limited exercise history and accordingly has for all new option grants applied the simplified method prescribed by SEC Staff Accounting Bulletin 110, Share-Based Payment: Certain Assumptions Used in Valuation Methods - Expected Term, to estimate expected life (computed as vesting term plus contractual term divided by two). In fiscal 2012, as the Company added employees and increased the number of grantees, management estimated a forfeiture rate on a specific grant basis. Forfeitures are estimated at the time of the grant and will be revised in subsequent periods if actual forfeitures differ from those estimates or if the Company updates its estimated forfeiture rate. Such amounts, if any, will be recorded as a cumulative adjustment in the period in which the estimate is changed.

 

The Company recorded share-based compensation in its statements of operations for the relevant periods as follows:

 

Years Ended September 30,   2012    2011 
Selling, general and administrative  $1,420,708   $94,031 
Research and development   266,201    94,280 
   $1,686,909   $188,311 

 

In addition the Company issued stock options valued at $20,000 during the year ended September 30, 2011 to a vendor as payment for tooling costs which was capitalized and included in equipment and tooling at September 30, 2011. The recorded value of these options was determined based on the value of the services provided as this was deemed to be a more reliable measurement of the consideration received.

 

As of September 30, 2012 total estimated compensation cost relating to stock options granted but not yet vested was $1,838,800. This cost is expected to be recognized over the weighted average period of 2.6 years.

 

The following table summarizes stock option activity for the period:

 

   Number   Weighted Average   Aggregate
Intrinsic Value
 
   of Shares   Exercise Price   (2) 

Fiscal 2011: 

            
Outstanding October 1, 2010              
Granted   347,000   $1.80      
Canceled/expired             
Exercised             
Outstanding September 30, 2011   347,000   $1.80      
                
Fiscal 2012:                
Outstanding October 1, 2011   347,000   $1.80      
Granted   1,054,000   $4.40      
Canceled/expired   (112,500)  $4.20      
Exercised   (120,000)  $1.61      
Outstanding September 30, 2012 (1)   1,168,500   $3.93   $3,363,770 
Exercisable September 30, 2012   608,771   $2.90   $2,216,082 

 

(1)Options outstanding are exercisable at prices ranging from $1.50 to $10.98 and expire in 2015 to 2017.
(2)Aggregate intrinsic value is based on the closing price of our common stock on September 30, 2012 of $6.49.

 

The total intrinsic value of options exercised during fiscal 2012 was $314,899. Cash received from the exercise of stock options for the year ended September 30, 2012 was $192,338.

 

The following table summarizes information about stock options outstanding at September 30, 2012:

 

Range of exercise prices  Number outstanding at September 30, 2012   Number exercisable at September 30, 2012   Weighted Average exercise price  Weighted average remaining contractual life  Weighted average Exercise price of options exercisable at September 30, 2012
$1.50-$2.90   197,500    197,500   $1.59  3  $1.59
$3.10-$4.55   832,000    397,563   $3.66  4.3  $3.36
$5.12-$6.00   37,000    5,208   $5.39  4.5  $5.89
$9.25-$10.98   102,000    8,500   $10.17  4.8  $10.17