Stock Compensation

9 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

Stock Compensation

NOTE 13 – STOCK COMPENSATION

The total number of underlying shares of the Company’s Class A common stock available for grant to directors, officers, key employees, and consultants of the Company or a subsidiary of the Company under the plan is 2,690,438 shares. Grants made under this plan must be approved by the Company’s Board of Directors. As of September 30, 2019, the Company had 461,966 shares reserved for issuance under the plan.

Stock Options

Under our stock option program, an employee receives an award that provides the opportunity in the future to purchase the Company’s shares at the market price of our stock on the date the award is granted (strike price). The options become exercisable over a range of immediately vested to four-year vesting periods and expire five years from the grant date, unless stated differently in the option agreements, if they are not exercised. Stock options have no financial statement effect on the date they are granted but rather are reflected over time through compensation expense. We record compensation expense based on the estimated fair value of the awards which is amortized as compensation expense on a straight-line basis over the vesting period. Accordingly, total expense related to the award is reduced by the fair value of options that are forfeited by employees that leave the Company prior to vesting.

Following is a summary of the option activities during the nine months ended September 30, 2019:

	Number of Units		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)
Outstanding, December 31, 2018		1,718,024	$	4.18		4.64
Granted		543,250	$	1.83
Cancelled		(88,641)	$	5.33
Outstanding, September 30, 2019		2,172,643	$	3.55		4.32
Exercisable, September 30, 2019		1,493,809	$	3.38		3.91

The Company estimates the fair value of each stock option award on the date of grant using a Black-Scholes option pricing model. As of September 30, 2019, the options had an intrinsic value of approximately $0.9 million.

On January 2, 2019, the Company granted 100,000 stock options each, for a total of 300,000 options to purchase common stock, to its President, Chief Executive Officer and Chief Operating Officer with an exercise price of $1.30 per share, which options vest monthly over one-year period. The expiration date of these options is five years from the grant date. These options had an aggregated fair value of approximately $186,411 on the grant date that was calculated using the Black-Scholes option-pricing model.

On March 12, 2019, the Company issued 20,000 stock options to Steve Barker, Vice President of Robotics at Boxlight with an exercise price of $2.50 per share. The expiration date of these options is ten years from the grant date. These options had an aggregate fair value of approximately $31,436 on the grant date.

On June 22, 2019, the Company granted 60,000 stock options to employees from the Qwizdom acquisition with an exercise price of $2.85 per share vesting annually over four years commencing June 22, 2020 as part of their compensation. The expiration date of these options is ten years from grant date. These options have an aggregate fair value of approximately $106,861on the grant date.

On August 6, 2019, the Company granted an aggregate of 131,250 stock options to each of its directors with an exercise price of $2.40 per share vesting monthly over one year. The expiration date of these options is five years from the grant date. These options had an aggregated fair value of approximately $146,380 on the grant date that was calculated using the Black-Scholes option-pricing model.

On September 17, 2019, the Company granted 32,000 stock options to employees from the EOS acquisition with an exercise price of $2.09 per share vesting annually over four years commencing September 17, 2020 as part of their compensation. The expiration date of these options is ten years from grant date. These options have an aggregate fair value of approximately $41,811on the grant date.

Variables used in the Black-Scholes option-pricing model for options granted during the nine months ended September 30, 2019 include: (1) discount rate of 1.54 - 2.47% (2) expected life, using a simplified method, of 3 to 6 years, (3) expected volatility of 69 - 70%, and (4) zero expected dividends.

Warrants

Following is a summary of the warrant activities during the nine months ended September 30, 2019:

	Number of Units		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)
Outstanding, December 31, 2018		1,184,121	$	1.9		1.63
Granted		60,827	$	2.2
Outstanding, September 30, 2019		1,244,948	$	1.5		0.85
Exercisable, September 30, 2019		1,191,824	$	1.26		0.75

During the nine months ended September 30, 2019, the Company issued 60,827 warrants to Dynamic Capital, the warrants were issued in accordance with the terms of the warrant agreement that required the issuance of additional shares when the Company issues shares to either raise additional capital or complete an acquisition.

Variables used in the Black-Scholes option-pricing model for warrants granted during the nine months ended September 30, 2019 include: (1) discount rate of 2.45 - 2.52% (2) expected life of 0.78 – 0.81 years, (3) expected volatility of 74%, and (4) zero expected dividends.

Stock compensation expense

For the nine months ended September 30, 2019 and 2018, the Company recorded the following stock compensation in general and administrative expense:

	2019		2018
Stock options	$	557,933	$	1,417,882
Warrants		42,585		149,294
Common stock		294,998		-
Total stock compensation expense	$	895,516	$	1,567,176

As of September 30, 2019, there was approximately $1.5 million of unrecognized compensation expense related to unvested options, which will be amortized over the remaining vesting period. Of that total, approximately $0.2 million is estimated to be recorded as compensation expense in the remaining three months of 2019.