SHARE-BASED COMPENSATION

3 Months Ended

Mar. 31, 2021

Share-based Payment Arrangement [Abstract]

SHARE-BASED COMPENSATION

On March 31, 2017, the Company adopted, and the stockholders approved, the 2017 Stock Incentive Plan (the “Plan”) authorizing 2,000,000 shares of Company Common Stock for issuance as stock options and restricted stock units to employees, directors or consultants. In May 2019, the stockholders ratified an increase in the Plan authorizing an additional 2,100,000 shares of Common Stock and in June 2020 ratified a further authorization of 1,900,000 shares of Common Stock for a total of 6,000,000 shares subject to the Plan. At March 31, 2021 there were 545,055 shares of Common Stock available for grant under the Plan.

In April 2021, the Board of the Company approved, subject to stockholder ratification, an increase in the Plan authorizing an additional 1,500,000 shares of Common Stock to a total of 7,500,000 shares.

The Company generally recognizes stock-based compensation expense on the grant date and over the period of vesting or period that services will be provided.

Stock Options

The following table summarizes stock option activity for the three months ended March 31, 2021:

				Weighted Average
	Options on					Remaining		Aggregate
	Common			Exercise		Contractual		Intrinsic
	Shares			Price		Term		Value
Outstanding December 31, 2020		3,931,586		$	4.41		4.80
Granted		577,500		$	5.28
Exercised		(75,000	)	$	1.50
Forfeited, cancelled, expired		(10,000	)	$	5.42
Outstanding March 31, 2021		4,424,086		$	4.57		5.39	$	5,533,110
Exercisable March 31, 2021		2,116,917		$	2.86		2.49	$	5,181,463

Options outstanding at December 31, 2020 and March 31, 2021 include 100,000 of performance-based options exercisable at $5.46 per share with vesting based on achieving certain virtual reality revenue targets by December 1, 2024. The Company has not recorded share-based compensation expense related to these options. All other options are service-based.

The Company uses the Black-Scholes option pricing model to determine the fair value of the options granted. The following table summarizes the assumptions used to compute the fair value of options granted to employees and non-employees:

	For the Three Months
	Ended March 31,
	2021			2020
Expected stock price volatility		50	%		n/a
Risk-free interest rate		0.89	%		n/a
Forfeiture rate		0	%		n/a
Expected dividend yield		0	%		n/a
Expected life of options - years		5.70			n/a
Weighted-average fair value of options granted	$	2.42			n/a

Estimated volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate each year during the expected life of awards. The Company’s estimated volatility was based on an average of the historical volatility of peer entities whose stock prices were publicly available. The Company’s calculation of estimated volatility is based on historical stock prices of these peer entities over a period equal to the expected life of the awards. The Company uses the historical volatility of peer entities due to the lack of sufficient historical data of its stock price.

The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the term of the options. The dividend yield of zero is based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends. The Company calculates the expected life of the options using the Simplified Method for the employee stock options as the Company does not have sufficient historical data.

Restricted Stock Units

The Plan provides for the grant of restricted stock units (“RSUs”). The following table summarizes RSU activity under the Plan for the three months ended March 31, 2021:

				Weighted Average		Weighted Average
	Service-Based			Grant Date		Vesting
	RSU's			Fair Value		Period
Unvested at December 31, 2020		428,006		$	6.13
Granted - service based		37,500		$	5.38
Vested		(64,660	)	$	4.72
Forfeited and cancelled		-
Unvested at March 31, 2021		400,846		$	6.29	2.18 Years

Subsequent Stock Awards

In April 2021 the Board of Directors granted a stock award pursuant to the Plan of 31,250 shares to each of its five directors with a grant date value of $5.56 per share for prior services. Stock expense of $869 will be recognized as of the grant date.

In April 2021 the Board of Directors granted each of its four non-executive directors an RSU grant of 10,882 shares vesting during the balance of 2021 with a grant date value of $5.56 per share. The $242 total stock compensation expense will be recognized over the 2021 vesting period.

Also, in April 2021 the Board of Directors granted Scot Cohen, the Company’s Executive Chairman, a ten-year stock option exercisable for 100,000 shares of Common Stock at an exercise price of $5.56 per share vesting during the balance of 2021. The $254 stock compensation expense will be recognized over the 2021 vesting period.

Upon the appointment of four additional new directors in April 2021 the Board of Directors granted each new director a stock option exercisable for 30,000 shares of Common Stock at an exercise price of $5.04 per share vesting over two years. The $292 total stock compensation expense will be recognized over the two-year vesting period. Each new director was also granted an RSU grant of 8,403 shares vesting during the balance of 2021 with a grant date value of $5.04 per share. The $169 total stock compensation expense will be recognized over the 2021vesting period.

Share-Based Compensation Expense

The Company recorded share-based compensation for options and RSUs in its statements of operations for the relevant periods as follows:

	Three Months Ended March 31,
	2021		2020
Selling, general and administrative	$	602	$	429
Research and development		257		38
Total share-based expense	$	859	$	467

As of March 31, 2021, total estimated compensation cost of stock options granted and outstanding but not yet vested was $5,419 which is expected to be recognized over the weighted average period of 2.7 years. As of March 31, 2021, total estimated compensation cost of RSUs granted and outstanding but not yet vested was $2,027 which is expected to be recognized over the weighted average period of 2.2 years.