Quarterly report pursuant to Section 13 or 15(d)

Equity Compensation Plan

v3.21.2
Equity Compensation Plan
6 Months Ended
Jun. 30, 2021
Equity [Abstract]  
Equity Compensation Plan

Note 7 – Equity Compensation Plan

 

On June 18, 2019, the Board of Directors and a majority of the Company’s shareholders, respectively, approved the 2019 Equity Compensation Plan (the “2019 Plan”). Under the 2019 Plan, 1,326,000 shares of common stock of the Company were authorized for issuance. The 2019 Plan provides for the issuance of incentive stock options, non-statutory stock options, rights to purchase common stock, stock appreciation rights, restricted stock, restricted stock, performance shares and performance units to employees, directors and consultants of the Company and its affiliates. The 2019 Plan requires the exercise price of stock options to be not less than the fair value of the Company’s common stock on the date of grant, or 110% of fair value in the case of incentive options granted to a ten-percent stockholder.

 

On March 11, 2020, the Company granted the following ten-year options to purchase shares of common stock at an exercise price of $1.50 per share to the Company’s newly appointed Executive Chairman and Acting Chief Executive Officer under the 2019 Plan: (i) an option to purchase 965,850 shares of common stock that vests ratably on a monthly basis over two years and (ii) an option to purchase 321,950 shares of common stock that vests based on performance criteria to be mutually agreed to by the Board and the executive. The grant was reduced to 500,000 options, including 375,000 options and 125,000 options respectively under the two categories, due to limitations under the 2019 Plan. The terms of the 125,000 performance based options were established in the quarter ended September 30, 2020. The terms of the performance based options were met during the quarter ended March 31, 2021.

 

On May 26, 2020, the Board of Directors and a majority of the Company’s shareholders approved an amendment to the 2019 Plan to (i) increase the number of shares of common stock authorized for issuance under the 2019 Plan by 1,174,000 shares, such that a total of 2,500,000 shares of common stock are now authorized for issuance under the 2019 Plan; (ii) increase the maximum aggregate number of shares, options and/or other awards that may be granted to any one person during any calendar year from 500,000 to 1,300,000; and (iii) clarify the availability of cashless exercise as a form of consideration.

 

On July 16, 2020, the Company granted the following ten-year options to purchase shares of common stock at an exercise price of $1.50 per share to the Company’s Executive Chairman and Acting Chief Executive Officer under the 2019 Plan: (i) an option to purchase 600,000 shares of common stock that vests ratably on a monthly basis over one year and (ii) an option to purchase 200,000 shares of common stock that vests based on specified performance criteria.

 

On September 16, 2020, the Board of Directors and a majority of the Company’s shareholders approved an amendment to the 2019 Plan to increase the number of shares of common stock authorized for issuance under the 2019 Plan from 2,500,000 shares to 4,600,000 shares.

 

On September 22, 2020, the Company granted a ten-year options to purchase shares 1,637,410 shares of common stock at an exercise price of $1.50 per share to the Company’s Chairman and Chief Executive Officer under the 2019 Plan that vests ratably on a monthly basis over two years commencing March 11, 2022.

 

From June 1 to June 22, 2021, the Company granted five and ten-year options to purchase shares 388,246 shares of common stock at an exercise price of $2.90 to $3.93 per share to employees, an advisory board member and board members under the 2019 Plan that vests over two to five years.

 

                       
    Shares   Weighted-Average Exercise
Price per share
  Weighted-Average Remaining
Contractual Life (years)
             
Balance, January 1, 2021     3,257,410     $ 1.50       9.1  
Options granted     388,246       3.69       7.8  
Options exercised     (45,625 )     1.50        
Options converted                    
Options forfeited or expired                  
Balance, June 30, 2021     3,600,031     $ 1.74       8.5  
Vested shares at June 30, 2021     570,031       1.50       8.5  

 

The Company has estimated the fair value of all stock option awards as of the date of grant by applying the Black-Scholes option-pricing model. In applying the Black-Scholes option pricing model, the Company used the following assumptions for 2021 and 2020 issuances:

 

               
Risk-free interest rate     1.1 %     1.75 %
Expected term     7.5 years       10 years  
Expected volatility     81 %     78 %
Expected dividends     0       0.00 %
Grant date fair value of common stock   $ 2.45 /share   $ 1.50 /share

 

During the six months ended June 30, 2021, the Company recognized stock-based compensation expense related to stock options of approximately $1,215,000 ($1,144,000 of which was included within general and administrative expenses, $42,000 of which was included in research and development expenses and $29,000 of which was included within cost of revenues on the consolidated statements of operations). During the six months ended June 30, 2020, the Company recognized stock-based compensation expense related to stock options of approximately $180,000 ($101,000 of which was included within general and administrative expenses, $36,000 of which was included in research and development expenses and $43,000 of which was included within cost of revenues on the consolidated statements of operations).

 

During the three months ended June 30, 2021, the Company recognized stock-based compensation expense related to stock options of approximately $545,000 ($501,000 of which was included within general and administrative expenses, $39,000 of which was included in research and development expenses and $5,000 of which was included within cost of revenues on the consolidated statements of operations). During the three months ended June 30, 2020, the Company recognized stock-based compensation expense related to stock options of approximately $79,000 ($69,000 of which was included within general and administrative expenses, $9,000 of which was included in research and development expenses and $1,000 of which was included within cost of revenues on the consolidated statements of operations).

 

As of June 30, 2021, there was unamortized stock-based compensation of approximately $3,100,000 which the Company expects to recognize over 2.0 years. At June 30, 2021, the intrinsic value of outstanding and vested stock options was approximately $3,300,000 and $1,400,000, respectively.