Share-Based Compensation

9 Months Ended

Sep. 30, 2022

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

Note 6 – Share-Based Compensation

Effective January 1, 2017, the Company adopted the 2017 Long Term Incentive Plan (the “Plan”) to attract and retain certain employees. The Plan provides for the issuance of up to 5,000,000 common stock equivalents, inclusive of an additional 2,500,000 shares authorized by the shareholders of the Company on June 30, 2022, subject to the terms and conditions of the Plan. The Plan generally provides for quarterly and bi-annual vesting over terms ranging from two to three years. The Company accounts for the Plan as an equity plan.

The Company recognizes stock options granted under the Plan at fair value determined by applying the Black Scholes options pricing model to the grant date market value of the underlying common shares of the Company.

The compensation expense associated with these stock options is amortized on a straight-line basis over their respective vesting periods. For the three months ended September 30, 2022 and 2021, the Company recognized $798,600 and $1,016,981, respectively, and for the nine months ended September 30, 2022 and 2021, the Company recognized $2,625,756 and $1,418,169, respectively, of non-cash share-based compensation expense in selling, general and administrative expenses in the condensed consolidated statements of operations.

Stock options activity as of September 30, 2022 is as follows:

				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number of	Exercise		Contract	Intrinsic
	Stock Options	Price		Term (Yrs.)	Value
Outstanding at December 31, 2021	1,377,339	$	16.13	3.37	$	2,579,201
Granted	277,500		8.82
Forfeited	(68,793)		18.76
Exercised	(40,000)		7.54
Expired	—		—
Outstanding at September 30, 2022	1,546,046	$	14.89	3.24	$	14,950
Vested and exercisable at December 31, 2021	648,119	$	11.64	2.77	$	2,407,521
Vested and exercisable at September 30, 2022	883,760	$	13.42	2.63	$	4,792

As of September 30, 2022 the Company had unrecognized pre-tax compensation expense of $6,094,009 related to non-vested stock options under the Plan of which $886,105, $3,333,955, $1,766,755 and $125,194 will be recognized in 2022, 2023, 2024 and 2025, respectively.

In addition to the compensation expense discussed above, the Company also recognized stock-based compensation in connection with the Redbox Merger which upon completion triggered accelerated vesting under the Redbox plans. There is $2,232,182 of additional compensation expense in selling, general and administrative expenses in the condensed consolidated statements of operations.

We used the following weighted average assumptions to estimate the fair value of stock options granted for the periods presented as follows:

	Nine Months Ended September 30,
Weighted Average Assumptions:	2022			2021
Expected dividend yield		—	%		—	%
Expected equity volatility		68.9	%		60.7	%
Expected term (years)		5			5
Risk-free interest rate		2.66	%		1.40	%
Exercise price per stock option	$	8.82		$	14.28
Market price per share	$	8.82		$	14.13
Weighted average fair value per stock option	$	4.89		$	7.48

The risk-free rates are based on the implied yield available on U.S. Treasury constant maturities with remaining terms equivalent to the respective expected terms of the options.

The Company estimates expected terms for stock options awarded to employees using the simplified method in accordance with ASC 718, Stock Compensation, because the Company does not have sufficient relevant information to develop reasonable expectations about future exercise patterns. The Company estimates the expected term for stock options using the contractual term. Expected volatility is calculated based on the Company’s peer group because the Company does not have sufficient historical data and will continue to use peer group volatility information until historical volatility of the Company is available to measure expected volatility for future grants.

The Company also awards common stock under the Plan to directors, employees and third-party consultants that provide services to the Company. The value is based on the market price of the stock on the date granted and amortized over the vesting period. For the three months ended September 30, 2022 and 2021, the Company recognized in selling, general and administrative expense, non-cash share-based compensation expense relating to common stock grants of $63,750 and $2,457,250, respectively. For the nine months ended September 30, 2022 and 2021, the Company recognized in selling, general and administrative expense, non-cash share-based compensation expense relating to common stock grants of $191,250 and $2,519,750, respectively.