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Note 10 - Stock-based Compensation
 9 Months Ended
Sep. 30, 2021
Notes to Financial Statements  
Share-based Payment Arrangement [Text Block]

NOTE 10. STOCK-BASED COMPENSATION

 

Stock Options

 

As of September 30, 2021, the Company had one active stock-based compensation plan: the 2020 Omnibus Stock Incentive Plan (the “2020 Plan”).

 

2020 Omnibus Stock Incentive Plan

 

On June 9, 2020, pursuant to authorization obtained from the Company’s stockholders, the Company adopted the 2020 Omnibus Stock Incentive Plan (the “2020 Plan”). Such plan had been previously unanimously approved by the Company’s Board. The purposes of our 2020 Plan are to enhance our ability to attract and retain highly qualified officers, non-employee directors, key employees and consultants, and to motivate those service providers to serve the Company and to expend maximum effort to improve our business results by providing to those service providers an opportunity to acquire or increase a direct proprietary interest in our operations and future success. The 2020 Plan also will allow us to promote greater ownership in our Company by the service providers in order to align the service providers’ interests more closely with the interests of our stockholders. Awards granted under the 2020 Plan are designed to qualify for special tax treatment under Section 422 of the Code.

 

Pursuant to the adoption of the 2020 Plan, such plan will supersede and replace the Company’s 1999 Plan and no new awards will be granted under the 1999 Plan thereafter. Any awards outstanding under the 1999 Plan on the date of approval of the 2020 Plan will remain subject to the 1999 Plan. Upon approval of our 2020 Plan, all shares of Common Stock remaining authorized and available for issuance under the 1999 Plan and any shares subject to outstanding awards under the 1999 Plan that subsequently expire, terminate, or are surrendered or forfeited for any reason without issuance of shares will automatically become available for issuance under our 2020 Plan. The Company amended the 2020 Plan to increase the number of shares of Common Stock available for issuance to 145.0 million shares. Such amendment became effective on April 21, 2021. As of September 30, 2021, there were 66,363,578 shares available for issuance under the 2020 Plan.

 

The Company estimates the fair value of its stock options using a Black-Scholes option-pricing model, consistent with the provisions of ASC 718, “Compensation - Stock Compensation”. The fair value of stock options granted is recognized to expense over the requisite service period. Stock-based compensation expense for all share-based payment awards is recognized using the straight-line single-option method. Stock-based compensation expense is reported in operating expense based upon the departments to which substantially all the associated employees report and credited to additional paid-in-capital.

 

ASC 718 requires the use of a valuation model to calculate the fair value of stock-based awards. The Company has elected to use the Black-Scholes option-pricing model, which incorporates various assumptions including volatility, expected life, and interest rates. The Company is required to make various assumptions in the application of the Black-Scholes option-pricing model. The Company has determined that the best measure of expected volatility is based on the historical weekly volatility of the Company’s Common Stock. The Company has elected to estimate the expected life of an award based upon the SEC approved “simplified method” noted under the provisions of Staff Accounting Bulletin Topic 14.

 

In addition to the key assumptions used in the Black-Scholes model, the estimated forfeiture rate at the time of valuation is a critical assumption. The Company has adopted the provisions of ASU 2016-09 and will continue to use an estimated annualized forfeiture rate. The Company utilized estimated forfeiture rate of 25% for options granted during the three months ended September 30, 2021. Company is currently in the process of reviewing the expected forfeiture rate to determine if that percent is still reasonable based on recent historical experience.

 

A summary of the activity under the Company’s stock option plans is as follows:

 

  

Options

  

Weighted-Average

Exercise Price

  

Weighted-Average

Remaining Contractual

Term (Years)

 

Balance at December 31, 2020

  2,585,500  $0.19   9.2 

Granted

  99,260,000  $0.06     

Expired/Cancelled

  (18,700,625

)

 $0.07     

Exercised

  -   -     

Balance at September 30, 2021

  83,144,875  $0.06   6.7 

 

During the three months ended September 30, 2021, the Company granted an aggregate of 33,540,000 options to purchase shares of Common Stock including 17,000,000 to certain officers and employees and 0 to certain members of the Company’s Board of Directors. Such options have an exercise price ranging from $0.048 to $0.06 and vest at various times through August 1, 2024.

 

During the nine months ended September 30, 2021, an aggregate of 18,700,625 options expired unexercised.

 

At September 30, 2021, a total of 83,144,875 options were outstanding, of which 15,424,688 were exercisable at a weighted average price of $0.06 per share with a remaining weighted average contractual term of 6.7 years. The Company expects that, in addition to the 15,424,688 options that were exercisable as of September 30, 2021, another 67,720,187 will ultimately vest resulting in a combined total of 83,144,875. Those 67,720,187 shares have a weighted average exercise price of $0.06 and an aggregate intrinsic value of approximately $0 as of September 30, 2021. Stock-based compensation expense related to equity options was approximately $794,411 for the nine months ended September 30, 2021.

 

The intrinsic value of options exercisable and outstanding at September 30, 2020 was $0. The aggregate intrinsic value for all options outstanding as of September 30, 2020 was $0. The weighted-average grant-date per share fair value of options granted during the nine months ended September 30, 2020 was $0.09. At September 30, 2020, the total remaining unrecognized compensation cost related to unvested stock options amounted to approximately $2,784,000, which will be recognized over a weighted-average period of 1.6 years.

 

The Company periodically issues Restricted Stock Units (“RSUs”) to certain employees which vest over time. When vested, each RSU represents the right to that number of shares of Common Stock equal to the number of RSUs granted. The grant date fair value for RSU’s is based upon the market price of the Company's Common Stock on the date of the grant. The fair value is then amortized to compensation expense over the requisite service period or vesting term.

 

A summary of the activity related to RSUs is as follows:

 

  

RSU’s

  

Weighted-Average

Issuance Price

 

Balance at December 31, 2020

  845,106  $0.14 

Granted

  -  $- 

Expired/Cancelled

  (540,576) $0.13 

Vested

  (220,728) $0.09 

Balance at September 30, 2021

  83,802  $0.13 

 

There were no RSUs granted to employees during the nine months ended September 30, 2021. During the nine months ended September 30, 2021, 220,728 RSUs vested with the remainder of outstanding RSUs vesting at various times through February 8, 2022.

 

During the three and nine months ended September 30, 2021, the Company recorded compensation expense of approximately $30,000 and $99,000, respectively related to RSUs. During the three and nine months ended September 30, 2020, the Company recorded compensation expense of approximately and $82,000 and $154,000, respectively related to RSUs. During the nine months ended September 30, 2021 and 2020, the Company issued 860,729 and 546,016 shares of its Common Stock pursuant to the vesting of RSUs. As part of the RSUs issued during the nine months ended September 30, 2021, were 555,000 shares of Common Stock pursuant to RSUs that vested in 2020 for which shares were not previously issued.

 

Stock-Based Compensation

 

Stock-based compensation related to equity options, RSUs and warrants has been classified as follows in the accompanying consolidated statements of income (loss) (in thousands):

 

  

Three Months Ended

September 30,

  

Nine Months Ended

September 30,

 
  

2021

  

2020

  

2021

  

2020

 

Cost of revenue

 $11  $2  $18  $6 

General and administrative

  303   83   511   240 

Sales and marketing

  122   19   214   120 

Research and development

  121   23   199   83 
                 

Total

 $557  $127  $942  $449