Share-Based Compensation

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

SHARE-BASED COMPENSATION

18. SHARE-BASED COMPENSATION

The Company accounts for share-based compensation in accordance with ASC 718, Compensation – Stock Compensation. ASC 718 requires companies to measure the cost of employee and non-employee services received in exchange for an award of equity instruments, including stock options, based on the grant-date fair value of the award and to recognize it as compensation expense over the period the employee and non-employee is required to provide service in exchange for the award, usually the vesting period.

Share-based compensation for employees and non-employees is recorded in the Consolidated Statement of Operations as a component of general and administrative expense with a corresponding increase to additional paid-in capital in shareholders' equity.

Stock Options

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.

No options were granted during the three months ended March 31, 2020.

The following table summarizes the assumptions used to estimate the fair value of stock options granted during the period January 10, 2019 (inception) to March 31, 2019:

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

The following table represents stock option activity for the three months ended March 31, 2020 and the period January 10, 2019 (Inception) to March 31, 2019:

	Number of Options			Weighted- Average Exercise Price per Share		Weighted- Average Contractual Life in Years		Aggregate Intrinsic Value
Outstanding – December 31, 2019		8,695,000		$	0.63		1.34	$	2,264,760
Granted		—			—		—		—
Exercised		—			—		—		—
Cancelled or Expired		(3,630,000	)		0.61		—		—
Outstanding – March 31, 2020		5,065,000		$	0.65		1.94	$	3,183,450
Exercisable – March 31, 2020		5,065,000		$	0.65		1.94	$	3,183,450

	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		—		—		—		—
Cancelled or Expired		—		—		—		—
Outstanding – March 31, 2019		14,170,000	$	0.61		1.82	$	6,359,500
Exercisable – March 31, 2019		13,710,000	$	0.60		1.81	$	6,345,500

For the three months ended March 31, 2020, there were no unvested stock options.

The Company did not record any share-based compensation expense for the three months ended March 31, 2020. Compensation expense related to stock options is recorded in share-based compensation expense in the Consolidated Statement of Operations. For the three months ended March 31, 2020 and the period January 10, 2019 (Inception) to March 31, 2019, there were 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 restricted stock awards ("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. ComSovereign recognized the full $352,000 of stock compensation expense for the RSAs during the period January 10, 2019 (inception) to March 31, 2019.

For the three months ended March 31, 2020, the Company did not recognize any expense related to RSAs. For the period January 10, 2019 (Inception) through March 31, 2019, the Company  recognized $72,500  compensation expense related to RSAs. 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 23 – Subsequent Events for information related to the adoption of the 2020 Long-Term Incentive Plan.