Annual report pursuant to Section 13 and 15(d)

Share Based Payments

v3.21.1
Share Based Payments
12 Months Ended
Dec. 31, 2020
Share-based Payment Arrangement [Abstract]  
SHARE BASED PAYMENTS
11. SHARE BASED PAYMENTS

 

The Company maintains long-term incentive plans for employee, non-employee members of our Board of Directors and consultants. The Plans allows us to grant equity-based compensation awards, including stock options, stock appreciation rights, performance share units, restricted stock units, restricted stock awards, or a combination of awards (collectively, share-based awards).

 

On March 6, 2014, the Company's Board of Directors (the "Board") approved the 2014 Equity Incentive Plan ("2014 Plan") pursuant to which the Company may grant incentive, non-statutory options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units and other stock or cash awards to employees, nonemployee members of our Board, consultants and other independent advisors who provide services to the Company. The maximum shares of common stock which may be issued over the term of the 2014 Plan shall not exceed 2,500,000 shares. Awards under the 2014 Plan are made by the Board or a committee designated by the Board. Options under the 2014 Plan are to be issued at the market price of the stock on the day of the grant except to those issued to holders of 10% or more of the Company's common stock which is required to be issued at a price not less than 110% of the fair market value on the day of the grant. Each option is exercisable at such time or times, during such period and for such numbers of shares shall be determined by the plan administrator. No option may be exercisable for more than ten years (five years in the case of an incentive stock option granted to a 10% stockholder) from the date of grant.

 

On January 7, 2018, the Board adopted the 2018 Equity Compensation Plan (the "2018 Plan") and on April 20, 2018, the shareholders approved the 2018 Plan. On February 7, 2020, the Board approved the amendment and restatement of the 2018 Plan to increase the number of shares issuable thereunder from 2,500,000 to 5,000,000, which amendment was approved by shareholders on May 11, 2020. The 2018 Plan will be administered by the Board. The Board may grant options to purchase shares of common stock, stock appreciation rights, restricted stock units, restricted or unrestricted shares of common stock, performance shares, performance units, other cash-based awards and other stock-based awards. The Board also has broad authority to determine the terms and conditions of each option or other kind of equity award, adopt, amend and rescind rules and regulations for the administration of the 2018 Plan and amend or modify outstanding options, grants and awards.

 

No options, stock purchase rights or awards may be made under the 2018 Plan on or after the ten-year anniversary of the adoption of the 2018 Plan by the Board, but the 2018 Plan will continue thereafter while previously granted options, stock appreciation rights or awards remain subject to the 2018 Plan. Options granted under the 2018 Plan may be either "incentive stock options" that are intended to meet the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") or "nonstatutory stock options" that do not meet the requirements of Section 422 of the Code. The Board will determine the exercise price of options granted under the 2018 Plan. The exercise price of stock options may not be less than the fair market value, on the date of grant, per share of our Common Stock issuable upon exercise of the option (or 110% of fair market value in the case of incentive options granted to a 10% stockholder). No option may be exercisable for more than ten years (five years in the case of an incentive stock option granted to a 10% stockholder) from the date of grant.

 

The Company accounts for share-based payments through the measurement and recognition of compensation expense for share-based payment awards made to employees and directors of the Company, including stock options and restricted shares. The Company also issues share based payments in the form of common stock warrants to non-employees.

 

The following table presents share-based payment expense for the years ended December 31, 2020 and 2019.

 

    December 31,  
    2020     2019  
Restricted stock   $ 5,164,133     $ 1,419,323  
Stock options     2,250,662       1,071,212  
Warrants     441,368       -  
Total   $ 7,856,163     $ 2,490,535  

 

As of December 31, 2020, the Company had approximately $3.7 million of unamortized share-based compensation for option awards and restricted stock awards, which is expected to be recognized over a weighted average period of two years. As of December 31, 2020, the Company also had approximately $4 million of unamortized share-based compensation for common stock warrants issued to consultants, which is expected to be recognized over a weighted average period of 3 years.

 

Restricted Stock

 

The Company issues shares of restricted stock to eligible employees, which are subject to forfeiture until the end of an applicable vesting period. The awards generally vest on the second or third anniversary of the date of grant, subject to the employee's continuing employment as of that date.

 

Restricted stock activity for the years ended December 31, 2020 and 2019 is presented in the following table:

 

    Shares     Weighted Average Grant Date Fair Value  
Nonvested, January 1, 2019     55,000     $ 3.35  
Granted    

353,500

     

2.50

 
Vested     (201,000 )    

3.02

 
Forfeited     (3,500 )     5.91  
Nonvested, December 31, 2019     204,000     $

3.82

 
Granted     1,293,000       4.90  
Vested     (799,833 )    

5.16

 
Forfeited    

(66,667

)    

4.15

 
Nonvested, December 31, 2020     630,500     $ 4.51  

 

Stock Option

 

Awards issued under the 2014 Plan as of December 31, 2020 are summarized below:

 

    2020  
Total Shares available for issuance pursuant to the 2014 Plan     2,500,000  
Options outstanding, December 31 2020     (50,000 )
Total options exercised under 2014 Plan     (2,058,833 )
Total shares issued pursuant to the 2014 Plan     (375,000 )
Awards available for issuance under the 2014 Plan, December 31, 2020     16,167  

 

    2020  
Total Shares available for issuance pursuant to the 2018 Plan, as amended     5,000,000  
Options outstanding, December 31 2020     (1,486,438 )
Total options exercised under 2018 Plan     (438,895 )
Total shares issued pursuant to the 2018 Plan     (1,112,979 )
Awards available for issuance under the 2018 Plan, December 31, 2020     1,961,688  

  

The fair value of each stock option and warrant granted is estimated on the grant date using the Black-Scholes option valuation model. The assumptions used to calculate the fair value of options and warrants granted are evaluated and revised, as necessary, to reflect market conditions and the Company's experience. Stock options and warrants are expensed on a straight-line basis over the vesting period, which is considered to be the requisite service period.

 

    2020     2019  
Expected volatility     77.75-80.7 %      87.8%-92.7 %
Expected dividends      None        None  
Expected term      2-5 years        2-5 years  
Risk-free rate      1.64-1.75 %     1.64 %

 

Options outstanding pursuant to 2014 Plan     50,000  
Options outstanding pursuant to 2018 Plan     1,486,438  
Options issued outside of 2014 and 2018 Plans     266,670  
Total options outstanding December 31, 2020     1,803,108  

 

The table below summarizes all the options granted by the Company during years ended December 31, 2020 and 2019:

 

Options   Shares     Weighted-
Average Exercise
Price
    Weighted- Average Remaining Contractual Term   Weighted-
Average Grant Date Fair Value
 
                       
Outstanding at January 1, 2019     1,815,500     $ 1.66     2.65 years   $ .78  
Granted     795,000     $ 3.42         $ 2.31  
Exercised     (667,500 )   $ .72         $ .16  
Forfeited or expired     (17,667 )   $ 2.78         $ 1.49  
Outstanding at December 31, 2019     1,925,333     $ 2.71     3.60 years   $ 1.71  
Vested and exercisable at December 31, 2019     1,346,333     $ 2.36     3.25 years   $ 1.32  
                             
Outstanding at January 1, 2020     1,925,333     $ 2.71     3.60 years   $ 1.71  
Granted     891,500     $ 4.75         $ 2.67  
Exercised     (983,725 )   $ 2.59         $ 1.35  
Forfeited or expired     (30,000 )   $ 2.75         $ 1.63  
Outstanding at December 31, 2020     1,803,108     $ 3.92     3.47 years   $ 2.38  
Vested and exercisable at December 31, 2020     1,057,734     $ 3.55     3.13 Years   $ 2.00