Quarterly report pursuant to Section 13 or 15(d)

STOCK-BASED COMPENSATION

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

NOTE 4 — STOCK-BASED COMPENSATION

 

On June 29, 2016, the Board of Directors amended the Company’s 2015 Stock Option Plan (as amended, the “Plan”) authorizing the Company to grant awards to certain executives, key employees, and consultants under the Plan, which was approved by shareholders at the Annual Meeting of Shareholders held on September 6, 2016.  The total number of shares of Common Stock, with respect to which awards may be granted pursuant to the Plan, may not exceed 6,000,000 pursuant to an amendment to the Plan approved by shareholders at their annual meeting on April 23, 2019.

 

On February 15, 2021, under the Plan, the Company issued to James M. Beck, its Interim Chief Executive Officer, a non-qualified option to purchase up to 150,000 shares of the Company’s common stock at an exercise price of $4.37 per share, of which 100,000 vested on February 15, 2021 and 50,000 vested on March 22, 2021.

 

On March 15, 2021, under the Plan, the Company issued to Linda Tharby, its incoming President and Chief Executive Officer, a non-qualified stock option to purchase up to 1,000,000 shares of the Company’s common stock at an exercise price of $3.875 per share, subject to vesting as follows: 25% on March 15, 2022 and 25% each twelve months thereafter.

 

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.

 

As of June 30, 2021, the Company had options to purchase 3,072,494 shares of Common Stock outstanding to certain executives, key employees and consultants under the Plan, of which 1,150,000 were issued during the six months ended June 30, 2021.

 

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 are 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 February 16, 2021, Donald Pettigrew, the Company’s former Chief Executive Officer, exercised options held by him for an aggregate 1,000,000 shares of common stock for an aggregate exercise price of $1,230,000.

 

On March 18, 2021, our shareholders approved the Company’s 2021 Omnibus Equity Incentive Plan (the “2021 Equity Plan”). There have been no awards made pursuant to the 2021 Equity Plan to date.

 

2015 STOCK OPTION PLAN, as amended

 

Time Based Stock Options

 

The per share weighted average fair value of stock options granted during the six months ended June 30, 2021 and June 30, 2020 was $3.06 and $6.68, 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 six months ended June 30, 2021 and June 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 $9,817 and $31,196 for the six months ended June 30, 2021 and 2020, respectively.

 

    June 30,  
    2021   2020  
               
Dividend yield     0.00%     0.00%  
Expected Volatility     74.01%-74.28%     62.1%  
Weighted-average volatility          
Expected dividends          
Expected term (in years)     10     10  
Risk-free rate     1.20%-1.62%     0.63%  

 

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

 

    Six Months Ended June 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   1,250,000   $ 3.94     60,000   $ 9.76  
Exercised   1,000,000   $ 1.23     722,000   $ 0.58  
Forfeited   100,000   $ 3.94     200,000   $ 2.09  
Outstanding at June 30   3,072,494   $ 3.41     2,785,000   $ 1.64  
Options exercisable at June 30   871,244   $ 2.18     812,760   $ 1.37  
Weighted average fair value of options granted during the period     $ 3.06       $ 6.68  
Stock-based compensation expense     $ 1,528,522       $ 290,991  

 

Total stock-based compensation expense was $1,528,522 and $290,991 for the six months ended June 30, 2021, and 2020, respectively. Cash received from option exercises for the six months ended June 30, 2021, and 2020 was $1,230,000 and $95,880, respectively.

 

The weighted-average grant-date fair value of options granted during the six months ended June 30, 2021, and 2020 was $3.8 million and $0.4 million, respectively.  There were 1.0 million options exercised during the six months ended June 30, 2021, and 722,000 during the six months ended June 30, 2020.

 

 

The following table presents information pertaining to options outstanding at June 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   3,072,494   7.7 years   $ 3.41   871,244   $ 2.18  

 

As of June 30, 2021, there was $5.4 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 June 30, 2021, and June 30, 2020, was $1,378,220 and $1,110,068, respectively.

 

Performance Based Stock Options

 

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

 

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

 

    Six Months Ended June 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 June 30     $   1,000,000   $ 1.70  
Options exercisable at June 30     $     $  
Weighted average fair value of options granted during the period     $     $  
Stock-based compensation expense     $ (408,747 )   $ 373,826  

 

Total performance stock-based compensation expense totaled ($408,747) and $373,826 for the six months ended June 30, 2021, and 2020, respectively. All performance-based stock options were forfeited as of June 30, 2021, and there was no unrecognized compensation cost remaining.

 

Restricted Stock Awards

 

The following table summarizes the activities for our unvested restricted stock awards for the six months ended June 30, 2021, and 2020.

 

    Six Months Ended June 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 June 30   1,000,000   $ 3.01     $  

 

 

As of June 30, 2021, there was $2,458,451 of unrecognized compensation cost related to unvested employee restricted shares. This amount is expected to be recognized over a weighted-average period of 21 months. We have recognized tax benefits associated with restricted stock award compensation of $13,888 and zero for the six months ended June 30, 2021 and 2020, respectively.