Share-Based Compensation

9 Months Ended

Sep. 30, 2021

Share-based Payment Arrangement [Abstract]

SHARE-BASED COMPENSATION

16. SHARE-BASED COMPENSATION

As described in Note 15 – Stockholders’ Equity, effective January 21, 2021, the Company enacted the Split of the Company’s common stock. As a result, the Company has given effect to the Split as if it occurred at the beginning of the first period presented for all share-based compensation. 

2020 Long-Term Incentive Plan

On April 22, 2020, the Company’s Board of Directors adopted the 2020 Long-Term Incentive Plan (the “2020 Plan”), which was approved by the stockholders on or about May 6, 2020. Employees, officers, directors and consultants that provide services to the Company or one of its subsidiaries may be selected to receive awards under the 2020 Plan. Awards under the 2020 Plan may be in the form of incentive or nonqualified stock options, stock appreciation rights, stock bonuses, restricted stock, stock units and other forms of awards including cash awards and performance-based awards.

As originally approved, a total of 3,333,334 shares of the Company’s common stock were authorized for issuance with respect to awards granted under the 2020 Plan. As approved by the stockholders on or about June 25, 2021, the amount authorized to be issued under the 2020 Plan has been increased to 8,333,334 shares of the Company’s common stock. Any shares subject to awards that are not paid, delivered or exercised before they expire or are cancelled or terminated, or fail to vest, as well as shares used to pay the purchase or exercise price of awards or related tax withholding obligations, will become available for other award grants under the 2020 Plan. As of September 30, 2021, 5,430,505 options had been issued under the 2020 Plan, of which 33,334 were forfeited and 63,333 have been exercised, and 2,936,163 shares authorized under the 2020 Plan remained available for award purposes.

The 2020 Plan will terminate on May 1, 2030. The maximum term of options, stock appreciation rights and other rights to acquire common stock under the 2020 Plan is ten years after the initial date of the award.

Restricted Stock Awards

On December 2, 2019, the Company’s Board of Directors granted an aggregate of 633,336 RSAs to nine officers and directors (“Participant”) at a grant date fair value of $2.46 per share. The original vesting period for these RSAs is as follows: 283,339 were to vest on the one-year anniversary of the grant date; 283,331 were to vest on the two-year anniversary of the original grant date; and 66,666 were scheduled to vest on the three-year anniversary of the original grant date. As of December 31, 2020, 283,339 RSAs had vested. In the first quarter of fiscal 2021, the Company modified the RSA awards for two individuals to accelerate the final vesting of their awards in consideration of the individuals’ separation and/or retirement. This modification resulted in the vesting of an additional 50,000 RSAs. An incremental compensation expense was recognized for the modification totaling $0.17 million during the nine months ended September 30, 2021. As of September 30, 2021, the remaining unvested RSAs from these awards, totaling 299,997, are scheduled to vest as follows: 233,331 are scheduled to vest on the two-year anniversary of the original grant date; and 66,666 were scheduled to vest on the three-year anniversary of the original grant date.

On January 26, 2021, the Company’s Board of Directors granted an aggregate of 66,667 RSAs to one director at a grant date fair value of $4.50 per share. The vesting period for these RSAs is as follows: 33,334 vest on the one-year anniversary of the grant date and 33,333 vest on the two-year anniversary of the original grant date.

For all RSAs that are currently outstanding, if the Participant’s employment with, engagement by, or service to the Company terminates for any reason (other than due to disability, retirement or death, or termination by employee for “Good Cause” as defined pursuant to a written employment contract) prior to the vesting of all or any portion of the RSAs granted, such RSAs shall immediately be cancelled. If the Participant’s employment with, engagement by, or service to the Company terminates due to the Participant’s death, disability or retirement, or by termination by such employee for “Good Cause” as defined pursuant to a written employment contract, the Participant shall become 100% vested in the RSAs granted as of the date of any such termination. There were no RSAs that were forfeited in the nine months ended September 30, 2021. For the three and nine months ended September 30, 2021, respectively, the Company recognized $0.18 million and $0.71 million of compensation expense related to RSAs and had unrecognized compensation cost as of September 30, 2021 for RSAs of $0.46 million.

Stock Options

On April 1, 2021, from shares available to be issued under the 2020 Plan, the Board of Directors of the Company granted options to purchase an aggregate 2,458,163 shares of common stock with exercise prices ranging from $2.75 to $3.025 per share and a grant date fair value ranging from $0.961 to $1.042 per share. These options have a three year service period and vest ratably on the first, second and third anniversary of their grant date.

Also, on April 1, 2021, the Board of Directors of the Company authorized the issuance of options to purchase an aggregate of 2,680,048 shares of common stock with an exercise price of $2.75 per share. These shares were in excess of the number of shares available under the 2020 Plan at that time and were subject to the approval by the Company’s stockholders of an increase to the shares available in the 2020 Plan as noted above. Effective with the approval of the shareholders on June 25, 2021, these shares were considered granted and have a grant date fair value ranging from $0.759 to 0.768 per share. Of these, options to purchase 753,837 shares have a three year service period and vest ratably on the first, second and third anniversary of their authorization for issuance and options to purchase 1,025,000 shares have a two-year service period and vest ratably on the first and second anniversary of their authorization for issuance.

On May 5, 2021, the Board of Directors of the Company authorized the issuance of options to purchase an aggregate of 295,000 shares of common stock with an exercise price of $2.75 per share. These shares were in excess of the amount of shares available under the 2020 Plan at that time and were subject to the approval by the Company’s stockholders of an increase to the shares available in the 2020 Plan as noted above. Effective with the approval of the shareholders on June 25, 2021, these shares are considered granted and have a grant date fair value of $0.873 per share. Of these, options to purchase 2,700,000 shares have a one year service period and vest ratably on the six month and twelve month anniversary of their authorization for issuance and options to purchase 25,000 shares vested immediately upon grant.

On June 29, 2021, the Board of Directors approved the modification of 655,002 options previously issued outside of the corporate plan. These options were scheduled to expire 90 days after the March 31, 2021 retirement of a long-time employee. This modification extended the expiration date of these options through December 15, 2021. The Company has recognized incremental compensation expense of $0.13 million related to this modification.

No options were granted during the three months ended September 30, 2020.

The following table summarizes the assumptions used to estimate the fair value of options granted during the nine months ended September 30, 2021:

	2021
Expected dividend yield		0	%
Expected volatility		46.5 - 53.02	%
Risk-free interest rate		0.48 - 0.89	%
Expected life of options		3.00 - 5.00 years

The following tables represent stock option activity for the nine months ended September 30, 2021 and 2020:

(Amounts in thousands except per share data)	Number of Options			Weighted- Average Exercise Price per Share		Weighted- Average Contractual Life in Years		Aggregate Intrinsic Value
Outstanding – December 31, 2020		3,433,515		$	1.59		2.01	$	15,221
Exercisable – December 31, 2020		3,400,181			1.58		1.99		15,129
Granted		4,532,000			2.76		4.51		—
Exercised		(63,333	)		0.26		3.77		85
Cancelled or Expired		(856,669	)		1.78		0.18		91
Outstanding – September 30, 2021		7,045,513		$	2.33		3.51	$	830
Exercisable – September 30, 2021		2,513,513		$	1.56		1.70	$	830

(Amounts in thousands except per share data)	Number of Options			Weighted- Average Exercise Price per Share		Weighted- Average Contractual Life in Years		Aggregate Intrinsic Value
Outstanding – December 31, 2019		2,898,347		$	1.90		1.92	$	2,265
Exercisable – December 31, 2019		2,898,347			1.90		1.92		2,265
Granted		908,505			0.77		4.59		5,838
Exercised		—			—		—		—
Cancelled or Expired		(333,335	)		2.01		0.59		1,903
Outstanding – September 30, 2020		3,440,183		$	1.59		2.26	$	19,339
Exercisable – September 30, 2020		3,406,849		$	1.58		2.24	$	19,207

The Company recognized $0.47 million and $0.82 million of share-based compensation expense related to options for the three and nine months ended September 30, 2021, respectively. The Company recognized $5 thousand of share-based compensation expense related to options for the nine months ended September 30, 2020. Compensation expense related to stock options is recorded in general and administrative in the Condensed Consolidated Statement of Operations. For the nine months ended September 30, 2021, the Company has $3.48 million of unrecognized compensation expense related to options. For the nine months ended September 30, 2020, the Company had $25 thousand of unrecognized compensation expense related to options.

Warrants

On January 26, 2021, the Company issued warrants to purchase an aggregate of 2,751,556 shares of the Company’s common stock as partial consideration for the debt extinguishments disclosed in Note 15 – Debt Agreements and Note 16 – Related Party Transactions. The warrants have an exercise price of $4.50 per share and an expiration date of January 26, 2026. The issuance date fair value of these warrants was estimated to be $1.597 per share. None of these warrants were exercised during the nine months ended September 30, 2021.

On January 26, 2021, the Company issued warrants to purchase an aggregate of 100,000 shares of the Company’s common stock as consideration for certain costs related to the First Offering as disclosed in Note 15 – Stockholders’ Equity. The warrants have an exercise price of $4.15 per share and an expiration date of January 21, 2026. The issuance date fair value of these warrants was estimated to be $1.703 per share. None of these warrants were exercised during the nine months ended September 30, 2021.

On January 26, 2021, the Company issued warrants to purchase an aggregate of 154,216 shares of the Company’s common stock as the Representative’s First Offering Warrants as discussed in Note 15 – Stockholders’ Equity. The Representative’s First Offering Warrants were subject to a lock-up for 180 days from the commencement of sales in the First Offering, including a mandatory lock-up period in accordance with FINRA Rule 5110(e), and were non-exercisable for six (6) months after January 21, 2021. The warrants have an exercise price of $5.1875 per share and an expiration date of January 21, 2026. The issuance date fair value of these warrants was estimated to be $1.376 per share. As of September 30, 2021, all warrants were exercisable but none of these warrants were exercised during the nine months ended September 30, 2021.

On January 26, 2021, the Company issued warrants to purchase an aggregate of 4,433,734 shares of the Company’s common stock as portion of the Units offered in the Company’s First Offering as disclosed in Note 15 – Stockholders’ Equity. The warrants have an exercise price of $4.50 per share and an expiration date of January 26, 2026. The issuance date fair value of these warrants was estimated to be $1.597 per share. None of these warrants were exercised during the nine months ended September 30, 2021.

On February 12, 2021, the Company issued warrants to purchase an aggregate of 225,882 shares of the Company’s common stock as the Representative’s Second Offering Warrants as discussed in Note 15 – Stockholders’ Equity. The Representative’s Second Offering Warrants were subject to a lock-up for 180 days from the commencement of sales in the Second Offering, including a mandatory lock-up period in accordance with FINRA Rule 5110(e), and were non-exercisable for six (6) months after February 10, 2021. The warrants have an exercise price of $5.3125 per share and an expiration date of February 10, 2026. The issuance date fair value of these warrants was estimated to be $1.918 per share. None of these warrants were exercised during the nine months ended September 30, 2021.

On May 27, 2021, the Company issued warrants to purchase an aggregate of 1,820,000 shares of the Company’s common stock in conjunction with a debt agreement as discussed in Note 15 – Debt Agreements. These warrants have an exercise price of $4.50, subject to adjustment, a grant date fair value of $0.505 per share, and expire on May 27, 2026.

On August 25, 2021, the Company issued warrants to purchase an aggregate of 1,315,789 shares of the Company’s common stock in conjunction with a debt agreement as discussed in Note 15 – Debt Agreements. These warrants have an exercise price of $3.00, subject to adjustment, a grant date fair value of $0.859 per share, and expire on August 25, 2026. 

All warrants are valued utilizing the Black-Scholes pricing model using the assumptions listed below. The weighted average grant date fair value of all warrants issued during the nine months ended September 30, 2021, was $1.328 per share.

The following table summarizes the assumptions used to estimate the fair value of warrants granted during the nine months ended September 30, 2021:

	2021
Expected dividend yield		0	%
Expected volatility		39.94 -  46.22	%
Risk-free interest rate		0.42 - 0.84	%
Contractual life of warrants		5.00 years

The following tables represents warrant activity for the nine months ended September 30, 2021 and 2020:

(Amounts in thousands except per share data)	Number of Warrants			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life in Years		Aggregate Intrinsic Value
Outstanding – December 31, 2020		890,416		$	1.46		4.02	$	4,083
Exercisable – December 31, 2020		890,416		$	1.46		4.02	$	4,083
Granted/Issued		10,804,881			4.09		4.45		—
Exercised		—			—		—		—
Forfeited or Expired		(13,706	)		1.90		0.85		1
Outstanding – September 30, 2021		11,681,591		$	3.89		4.37	$	679
Exercisable – September 30, 2021		11,681,591		$	3.89		4.37	$	679

(Amounts in thousands except per share data)	Number of Warrants			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life in Years		Aggregate Intrinsic Value
Outstanding – December 31, 2019		167,846		$	2.85		1.96	$	258
Exercisable – December 31, 2019		167,846		$	2.85		1.96	$	258
Granted		858,985			1.39		4.43		5,016
Exercised		(94,510	)		0.03		1.25		678
Forfeited or Expired		—			—		—		—
Outstanding – September 30, 2020		932,321		$	1.79		4.17	$	5,251
Exercisable – September 30, 2020		932,321		$	1.79		4.17	$	5,251