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Share-Based Compensation
 12 Months Ended
Dec. 31, 2019
Share-based Payment Arrangement [Abstract]  
SHARE-BASED COMPENSATION

14. SHARE-BASED COMPENSATION

 

Stock Options

 

The following information relates to the stock option activity of the Company prior to the ComSovereign Acquisition.

 

During 2017, the Company granted the following options outside of any equity plan with the attributes described below to purchase the Company’s common stock (amounts in US$’s, except share data):

 

Grant Date   Underlying Shares     Option Price     Full Vesting Date   Expiration Date
January 9, 2017     100,000     $ 2.90     January 9, 2019   January 7, 2021
August 3, 2017     5,130,000     $ 0.50     August 3, 2017   August 3, 2021
November 9, 2017     2,000,000     $ 0.50     November 9, 2017   November 9, 2021
December 13, 2017     200,000     $ 1.00     November 13, 2019   December 13, 2021

 

During 2018, the Company granted the following options outside of any equity plan with the attributes described below to purchase the Company’s common stock (amounts in US$’s, except share data):

 

Grant Date   Underlying Shares     Vesting   Option Price     Full Vesting Date   Expiration Date
March 28, 2018     100,000     50% in one year; 50% in two years from grant date   $ 1.00     March 28, 2020   March 28, 2022
May 16, 2018     330,000     Immediate vesting   $ 1.00     May 16, 2018   May 16, 2022
May 16, 2018     130,000     50% in one year; 50% in two years from grant date   $ 1.00     May 16, 2020   May 16, 2022
September 26, 2018     6,000,000     $4,000,000 new government orders   $ 0.65     December 21, 2018   September 26, 2022

 

All of the above options were outstanding as of January 10, 2019.

 

On March 20, 2019, the Company granted options outside of any equity plan to two employees and one non-employee for the purchase of an aggregate of 180,000 shares of the Company’s common stock. All the options have an exercise price of $1.06 per share and expire on March 20, 2023. Under the Black-Scholes option pricing model, the fair value of the 180,000 options on the date of grant was estimated at $123,130.

 

The following table summarizes the assumptions used to estimate the fair value of stock options granted during fiscal 2019:

 

   2019 
Expected dividend yield   0%
Expected volatility   90%
Risk-free interest rate   2.40-2.47%
Expected life of options   4.0 years 

 

Total recognized compensation expense related to the Company’s stock options was $157,441 for fiscal 2019. All options granted by the Company vested upon the change of control resulting from the completion of the ComSovereign Acquisition on November 27, 2019.

 

The following table represents stock option activity of ComSovereign and the Company as of and for fiscal 2019:

 

   Number of
Options		   Weighted-
Average
Exercise
Price per
Share		   Weighted-
Average
Contractual
Life in
Years		   Aggregate
Intrinsic
Value		 
Outstanding – January 10, 2019   13,990,000   $0.61    3.15   $— 
Granted   180,000    1.06           
Exercised   (5,250,000)   0.57           
Cancelled or Expired   (225,000)   0.72           
Outstanding – December 31, 2019   8,695,000   $0.63    1.34   $2,264,760 
Exercisable – December 31, 2019   8,695,000   $0.63    1.34   $2,264,760 

 

As of December 31, 2019, there were no unvested stock options.

 

The Company did not record any compensation expense for the period from November 27, 2019, the date of the ComSovereign Acquisition, to December 31, 2019. Compensation expense related to stock options would be recorded in general and administrative expense in the Consolidated Statement of Operations. As of December 31, 2019, there was no unrecognized compensation expense related to stock options.

 

Restricted Stock Awards

 

On March 25, 2019, ComSovereign’s Board of Directors granted an aggregate of 80,000 RSAs to a non-employee for consulting services, of which 60,000 RSAs immediately vested and 20,000 RSAs vested upon the change in control of ComSovereign in connection with the ComSovereign Acquisition. The grant date fair value of these RSAs was $4.40 per share of common stock for a total value of $352,000.

 

On November 12, 2019, the Company’s Board of Directors granted an aggregate of 2,300,000 RSAs to eight employees. The RSAs vested upon the change of control upon the completion of the ComSovereign Acquisition on November 27, 2019. The Company recorded $1,495,000 in share-based compensation expense related to these RSAs during fiscal 2019, prior to the ComSovereign Acquisition. No compensation expense was recognized for the period November 27, 2019, the date of the ComSovereign Acquisition, through December 31, 2019. 

 

On November 14, 2019, ComSovereign’s Board of Directors granted an aggregate of 40,000 RSAs to a non-employee for consulting services that vested immediately. The grant date fair value of these RSAs was $4.40 per share of common stock for a total value of $176,000.

 

On November 19, 2019, ComSovereign’s Board of Directors granted an aggregate of 270,800 RSAs to noteholders, employees, non-employees and an officer with a grant date fair value of $4.40 per share of common stock that vested immediately for a total value of $1,191,520.

 

On November 27, 2019, ComSovereign’s Board of Directors granted an aggregate of 50,000 RSAs that immediately vested to a non-employee for assistance in negotiating a secured loan agreement on ComSovereign’s behalf. The grant date fair value of these RSAs was $4.40 per share of common stock for a total value of $220,000.

 

On December 2, 2019, the Company’s Board of Directors granted an aggregate of 1,900,000 RSAs to nine officers and directors. The vesting period for these RSAs is as follows: 850,000 vest on the one-year anniversary of the grant date; 850,000 vest on the two-year anniversary of the original grant date; and 200,000 vest on the three-year anniversary of the original grant date. The Company recognized $54,667 in share-based compensation expense for these RSAs during fiscal 2019 which was recognized after the ComSovereign Acquisition.

 

Total recognized compensation expense related to the RSAs was $258,256 which was recorded in general and administration expense in the Consolidated Statement of Operations. See Note 1 – Description of Business and Basis of Presentation for information about the shares issued in connection with the formation of ComSovereign.

 

See Note 20 – Subsequent Events for information related to the adoption of the 2020 Long-Term Incentive Plan.