Quarterly report pursuant to Section 13 or 15(d)

STOCK-BASED COMPENSATION

v3.21.2
STOCK-BASED COMPENSATION
9 Months Ended
Sep. 30, 2021
Share-based Payment Arrangement [Abstract]  
STOCK-BASED COMPENSATION

NOTE 4 — STOCK-BASED COMPENSATION

 

The Company has two equity incentive plans: the 2015 Stock Option Plan, as amended (the “2015 Plan”) and the 2021 Omnibus Equity Incentive Plan (the “2021 Plan”). As of September 30, 2021, there were options to purchase 3,385,000 shares of the Company’s common stock outstanding to certain executives, key employees and consultants under the 2015 Plan, of which 1,650,000 were issued during the nine months ended September 30, 2021. Additional options may be issued under the 2015 Plan as outstanding options are forfeited, subject to a maximum 6,000,000 available for issuance under the 2015 Plan. The 2021 Plan provides for the grant of up to 1,000,000 incentive stock options, nonqualified stock options, stock awards, restricted stock awards, restricted stock units and/or stock appreciation rights to employees, consultants and directors. As of September 30, 2021, there had been issued 20,988 shares of common stock as directors fees under the 2021 Plan.

 

Prior to January 1, 2021, each non-employee director of the Company was eligible to receive $50,000 annually (effective January 1, 2019), plus $10,000 for chairing a Board committee (effective February 20, 2019), all to be paid quarterly half in cash and half in common stock.  The Chairman of the Board was eligible to receive an additional $50,000 annually (effective October 1, 2019), all to be paid in common stock.

 

Effective January 1, 2021, each non-employee director of the Company (other than the Chairman of the Board) and Board advisor were eligible to receive of $75,000 annually, to be paid quarterly $12,500 in cash and $6,250 in common stock.  The Chairman of the Board is eligible to receive $100,000 annually, to be paid quarterly $12,500 in cash and $12,500 in common stock.   Effective May 18, 2021, each non-employee director of the Company (other than the Chairman of the Board) and Board advisor are eligible to receive of $110,000 annually, to be paid quarterly $12,500 in cash and $15,000 in common stock.  The Chairman of the Board is eligible to receive $140,000 annually, to be paid quarterly $12,500 in cash and $22,500 in common stock. All payments were and are pro-rated for partial service.

 

On May 20, 2020, the Company entered into a Settlement Agreement with EMED Technologies Corporation (“EMED”) to settle all claims in connection with all pending litigation matters between them.  Pursuant to the Settlement Agreement, the Company issued to EMED (i) 95,238 restricted stock units, which vested on May 21, 2020, and 95,238 restricted stock units, which vested on January 1, 2021, and (ii) an option to purchase up to 400,000 shares of the Company’s common stock at an exercise price of $11.21 per share prior to February 1, 2021, which was not exercised.

 

On April 12, 2021, pursuant to an employment agreement entered into on March 15, 2021, with Linda Tharby, the Company’s President and Chief Executive Officer, the Company issued three restricted stock awards for an aggregate 1,000,000 shares of common stock for an aggregate stock price of $3,310,000 and each vesting subject to employment on the respective vesting date. These awards were issued as an inducement employment.

 

2015 STOCK OPTION PLAN, as amended

 

Time Based Stock Options

 

The per share weighted average fair value of stock options granted during the nine months ended September 30, 2021 and September 30, 2020 was $2.93 and $6.53, respectively.  The fair value of each award is estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in the nine months ended September 30, 2021 and September 30, 2020. Historical information was the primary basis for the selection of the expected volatility, expected dividend yield and the expected lives of the options.  The risk-free interest rate was selected based upon yields of the U.S. Treasury issues with a term equal to the expected life of the option being valued. We have recognized tax benefits associated with stock-based compensation of $56,102 and $150,566 for the nine months ended September 30, 2021 and 2020, respectively.

 

    September 30,  
    2021   2020  
               
Dividend yield     0.00%     0.00%  
Expected Volatility     74.0176.77%     62.1162.18%  
Weighted-average volatility          
Expected dividends          
Expected term (in years)     10     10  
Risk-free rate     1.201.62%     0.63 0.64%  

 

The following table summarizes the status of the Plan with respect to time based stock options:

 

    Nine Months Ended September 30,  
    2021   2020  
    Shares   Weighted
Average
Exercise
Price
  Shares   Weighted
Average
Exercise
Price
 
                   
Outstanding at January 1   2,922,494   $ 2.46   3,647,000   $ 1.32  
Granted   1,650,000   $ 3.75   360,000   $ 9.54  
Exercised   1,000,000   $ 1.23   747,006   $ 0.65  
Forfeited   187,494   $ 3.36   200,000   $ 2.09  
Outstanding at September 30   3,385,000   $ 3.39   3,059,994   $ 2.40  
Options exercisable at September 30   1,005,625   $ 2.65   1,009,629   $ 1.36  
Weighted average fair value of options granted during the period     $ 2.93     $ 6.53  
Stock-based compensation expense     $ 1,934,935     $ 572,775  

 

Total stock-based compensation expense was $1,934,935 and $572,775 for the nine months ended September 30, 2021, and 2020, respectively. Cash received from option exercises for the nine months ended September 30, 2021, and 2020 was $1,230,000 and $95,880, respectively.

 

The weighted-average grant-date fair value of options granted during the nine months ended September 30, 2021, and 2020 was $4.8 million and $2.4 million, respectively.  There were 1.0 million options exercised during the nine months ended September 30, 2021, and 747,006 during the nine months ended September 30, 2020.

 

The following table presents information pertaining to options outstanding at September 30, 2021:

 

Range of Exercise Price   Number
Outstanding
  Weighted
Average
Remaining
Contractual
Life
  Weighted
Average
Exercise
Price
  Number
Exercisable
  Weighted
Average
Exercise
Price
 
                           
$0.50-$9.76   3,385,000   7.8 years   $ 3.39   1,005,625   $ 2.65  

 

As of September 30, 2021, there was $5.8 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan.  That cost is expected to be recognized over a weighted-average period of 46 months.  The total fair value of shares vested as of September 30, 2021, and September 30, 2020, was $1,909,141 and $874,041, respectively.

 

Performance Based Stock Options

 

There were no stock options granted during the nine months ended September 30, 2021, and 2020.

 

The following table summarizes the status of the Plan with respect to performance-based stock options:

 

    Nine Months Ended September 30,  
    2021   2020  
    Shares   Weighted
Average
Exercise
Price
  Shares   Weighted
Average
Exercise
Price
 
                   
Outstanding at January 1   1,000,000   $ 1.70   1,000,000   $ 1.70  
Granted     $     $  
Exercised     $     $  
Forfeited   1,000,000   $ 1.70     $  
Outstanding at September 30     $   1,000,000   $ 1.70  
Options exercisable at September 30     $   333,333   $ 1.70  
Weighted average fair value of options granted during the period     $     $  
Stock-based compensation expense     $ (408,747 )   $ 438,365  

 

Total performance stock-based compensation expense totaled ($408,747) and $438,365 for the nine months ended September 30, 2021, and 2020, respectively. All performance-based stock options were forfeited as of September 30, 2021, and there was no unrecognized compensation cost remaining.

 

RESTRICTED STOCK AWARDS

 

On April 12, 2021, pursuant to an employment agreement entered into on March 15, 2021, with Linda Tharby, the Company’s President and Chief Executive Officer and as an inducement to her employment, the Company issued three restricted stock awards for an aggregate 1,000,000 shares of common stock for an aggregate stock price of $3,310,000 and each vesting subject to employment on the respective vesting date. The following table summarizes the activities for our unvested restricted stock awards for the nine months ended September 30, 2021, and 2020.

 

    Nine Months Ended September 30,  
    2021   2020  
    Shares   Weighted
Average
Grant-Date Fair Value
  Shares   Weighted
Average
Grant-Date Fair Value
 
                   
Unvested at January 1     $     $  
Granted   1,000,000   $ 3.01     $  
Vested     $     $  
Forfeited/canceled     $     $  
Unvested at September 30   1,000,000   $ 3.01     $  

 

As of September 30, 2021, there was $2,379,089 of unrecognized compensation cost related to unvested employee restricted shares. This amount is expected to be recognized over a weighted-average period of 39 months. We have recognized tax benefits associated with restricted stock award compensation of $30,554 and zero for the nine months ended September 30, 2021 and 2020, respectively.