STOCK COMPENSATION

3 Months Ended

Mar. 31, 2023

STOCK COMPENSATION

STOCK COMPENSATION

NOTE 12 – STOCK COMPENSATION

The Company has issued grants under two equity incentive plans, both of which have been approved by the Company’s shareholders: (i) the 2014 Equity Incentive Plan, as amended (the “2014 Plan”), pursuant to which  a total of 6,390,438 shares of the Company’s Class A common stock have been approved for issuance, and (ii) the 2021 Equity Incentive Plan (the “2021 Plan”), pursuant to which a total of 5,000,000 shares of the Company’s Class A common stock have been approved for issuance. Upon approval of the 2021 Plan in June 2021, any shares remaining available for issuance under the 2014 Plan were cancelled, and all future grants were issued under the 2021 Plan. The 2021 Plan allows for issuance of shares of our Class A common stock, whether through restricted stock, restricted stock units, options, stock appreciation rights or otherwise, to the Company’s officers, directors, employees and consultants. As of March 31, 2023, the Company has issued 6,199,231 shares under the 2021 Plan, such that the Company is over the authorized share number. The Company intends to increase the number of shares available for issuance under the 2021 Plan in May 2023. The fair value of any shares issued in excess of the approved shares under the 2021 Plan was less than $15 thousand and have been recorded in accounts payable and accrued expenses in the condensed consolidated balance sheets at March 31, 2023.

Stock Options

Under the Company’s stock option program, pursuant to the 2014 Plan and 2021 Plan, 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 three months ended March 31, 2023:

	Number of
	Units
Outstanding, December 31, 2022	3,915,877
Granted	2,914,386
Exercised	—
Cancelled	(481,682)
Outstanding, March 31, 2023	6,348,581
Exercisable, March 31, 2023	2,606,537

On January 1, 2023, the company granted 2,041,098 options which vest ratably over three years. 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 options issued during the three months ended March 31, 2023: market value on measurement date, $0.21 to $0.28; exercise price of $0.31 to $0.40; risk free interest rate, 4.19% to 4.22%; expected term, 3 years to 4 years; expected volatility, ranged from 111.45 to 111.74 and expected dividend yield of 0%.

Restricted Stock Units

Under the Company’s 2014 Plan and 2021 Plan, 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 three months ended March 31, 2023:

	Number of Units
Outstanding, December 31, 2022	2,431,030
Granted	578,778
Vested	(361,965)
Forfeited	(73,077)
Outstanding, March 31, 2023	2,574,766

On January 1, 2023, the Company granted 578,778 RSU’s to our Chief Executive Officer, in accordance with his employment agreement. The RSU’s vest ratably over a three-year period.

Stock Compensation Expense

For the three months ended March 31, 2023 and 2022, the Company recorded the following stock compensation in general and administrative expense (in thousands):

		2023		2022
Stock options	$	169	$	115
Restricted stock units		471		1,019
Warrants		1		1
Total stock compensation expense	$	641	$	1,135