STOCK COMPENSATION

9 Months Ended

Sep. 30, 2022

STOCK COMPENSATION

STOCK COMPENSATION

NOTE 13 – STOCK COMPENSATION

Grants made under the Equity Incentive Plans must be approved by the Company’s board of directors. As of September 30, 2022, 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 Company’s 2021 Equity Incentive Plan were 2,725,400 shares.

Stock Options

Under the Company’s stock option program, pursuant to the Equity Incentive Plans, an employee receives an award that provides the opportunity in the future to purchase the Company’s shares at the market price of the stock on the date the award is granted (the 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.

The following is a summary of the option activities during the nine months ended September 30, 2022:

				Weighted
				Average
		Weighted		Remaining
	Number of	Average		Contractual
	Units	Exercise Price		Term (in years)
Outstanding, December 31, 2021	4,054,116	$	1.92	2.29
Granted	1,221,744	$	1.12
Exercised	(193,841)	$	0.24
Cancelled	(724,408)	$	1.75
Outstanding, September 30, 2022	4,357,611	$	1.80	2.28
Exercisable, September 30, 2022	3,042,376	$	2.20	1.80

The Company estimates the fair value of each stock option award on the date of grant using a Black-Scholes option pricing model. The Company used the following inputs to value warrants issued during the nine months ending September 30, 2022 using the Black Scholes option valuation method: market value on measurement date, $0.59 to $0.93; exercise price of $5.01 to $0.68; risk free interest rate, 1.69% to 2.87%; expected term, 3 to 4 years; expected volatility, ranged from 141 to 148 and expected dividend yield of 0%.

As of September 30, 2022 and December 31, 2021, the stock options had an intrinsic value of approximately $150 thousand and $1.9 million, respectively.

On May 3, 2022, the Boxlight board of directors adopted a resolution, in exchange for a three-year non-compete agreement, to grant Mark Elliott, a member of the board and former CEO of the Company, an extension for one year, of previously granted stock options to purchase a total of 577,675 shares of Class A common stock, par value $0.001 per share, which had expired on January 12, 2022. The stock price on the remeasurement date was $1.04 and the incremental compensation recognized was $314,000.

On June 13, 2022, the Boxlight board of directors granted Greg Wiggins, our Chief Financial Officer, stock options for 150,000 shares of the Company’s Class A common stock will vest in equal quarterly installments over a four-year term commencing on July 5, 2022. 

Restricted Stock Units

Under the Company’s Equity Incentive Plans the Company may grant restricted stock units (“RSUs”) to certain employees and non-employee directors. Upon granting the RSUs, the Company recognizes a fixed compensation expense equal to the fair market value of the underlying shares of RSUs granted on a straight-line basis over the requisite services period for the RSUs. Compensation expense related to the RSUs is reduced by the fair value of units that are forfeited by employees that leave the Company prior to vesting. The RSUs vest over a range of immediately vested to four-year vesting periods in accordance with the terms of the applicable RSU grant agreement.

The following is a summary of the RSU activities during the nine months ended September 30, 2022.

		Weighted
		Average
		Grant Date Fair
	Number of Units	Value
Outstanding, December 31, 2021	1,973,947	$	1.81
Granted	2,411,662	$	1.20
Vested	(1,179,754)	$	1.73
Forfeited	(370,151)	$	1.38
Outstanding, September 30, 2022	2,835,704	$	1.37

On March 21, 2022, the Company granted an aggregate of 348,840 RSUs to its board members. These RSUs vest ratably over one year and had an aggregated fair value of approximately $450 thousand on the grant date.

On February 14, 2022, with an effective date of January 1, 2022, the Company entered into a letter agreement with Michael Pope, the Chairman and Chief Executive Officer, extending Mr. Pope’s term of employment with the Company. Under the terms of the agreement, Mr. Pope received a grant of 163,637 RSU’s, valued at approximately $180,000, and vesting over three years and 494,069 options to purchase Class A Common Stock, which are valued using the Black-Scholes Model with the Company’s customary inputs.

On February 24, 2022, following approval by the Company’s board of directors, the Company’s senior management issued a total of 1,771,950 RSUs under the terms of Amendment No. 2 to the Boxlight Corporation 2014 Stock Incentive Plan, vesting over four years, as long-term incentive awards to its employees in the U.S. and Europe. The aggregate fair value of the shares was $2.1 million.

During the first quarter ended March 31, 2022, Jens Holstebro, a former FrontRow employee, received 39,683 in restricted shares of Class A common stock, valued at $50,000, as a bonus, which restricted stock vested immediately.

Stock Compensation Expense

For the three and nine months ended September 30, 2022 and 2021, the Company recorded the following stock compensation in general and administrative expense (in thousands):

		Three months ended September 30,				Nine months ended September 30,
		2022		2021		2022		2021
Stock options	$	128	$	153	$	683	$	544
Restricted stock units		474		1,005		1,980		2,472
Warrants		1		3		2		4
Total stock compensation expense	$	603	$	1,161	$	2,665	$	3,020

As of September 30, 2022, there was approximately $4.7 million of unrecognized compensation expense related to unvested options, restricted stock units, and warrants, which expense will be amortized over the remaining vesting period of such awards. Of that total, approximately $608 thousand is estimated to be recorded as compensation expense in the remaining three months of 2022.