Note 15 - Stock-based Compensation

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

15.  STOCK-BASED COMPENSATION

Stock Options

As of December 31, 2020, 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. As of December 31, 2021, there are approximately 63,747,077 shares available for issuance under the 2021 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. 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. Historical volatility factors utilized in the Company’s Black-Scholes computations for options granted during the years ended December 31, 2021 and 2020 ranged from 57% to 99%. 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. The expected term used by the Company to value the grants issued during the years ended December 31, 2021 and 2020 ranged from 3.33 to 5.17 years. The interest rate used is the risk-free interest rate and is based upon U.S. Treasury rates appropriate for the expected term. Interest rates used in the Company’s Black-Scholes calculations for the years ended December 31, 2021 and 2020 ranged from 1.37% to 2.58%. Dividend yield is zero as the Company does not expect to declare any dividends on the Company’s common shares in the foreseeable future.

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 utilized an estimated annualized forfeiture rate ranging from approximately 5% to 10% for corporate officers, 4.1% to 10% for members of the Board of Directors and 15.0% to 25% for all other employees. The Company reviews the expected forfeiture rate annually to determine if that percent is still reasonable based on 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, 2019		7,204,672		$	1.32		5.3
Granted		2,450,000		$	0.14
Expired/Cancelled		(7,069,172	)	$	1.33
Exercised		—
Balance at December 31, 2020		2,585,500		$	0.19		9.2
Granted		99,460,000			0.06
Expired/Cancelled		(97,226,624	)		0.06
Exercised		—
Balance at December 31, 2021		4,818,876			0.08		3.5

During the year ended December 31, 2021, the Company issued an aggregate 99,460,000 options to purchase common stock at exercise prices of $0.030 to $0.070 and vest at various times through August 2024. 

During the year ended December 31, 2021, the Company entered into exchange agreements with certain employees, officers, Board of Director members and non-employee contractors pursuant to which such persons exchanged 76,477,500 Common Stock purchase options for 76,477,500 Restricted Stock Units (RSUs). The Company determined that the exchange agreements are a modification of a share-based payment award under ASC 718. Accordingly, the Company computed any incremental compensation expense as a component of the total compensation cost to be measured at the modification date. Aggregate incremental compensation expense measured from the modifications of stock options was approximately $1,308,000. Such expense will be amortized over the requisite service period of the RSU agreements.

In addition to the aggregate 76,477,500 options exchanged, an additional 20,749,124 Common Stock purchase options expired unexercised during the year ended December 31, 2021.

During the years ended December 31, 2021 and 2020, there were no options exercised for cash.

At December 31, 2021, a total of 4,818,876 options were outstanding, of which 3,525,123 were exercisable at a weighted average price of $0.09 per share with a remaining weighted average contractual term of 3.46 years.  The Company expects that, in addition to the 3,525,123 options that were exercisable as of December 31, 2021, another 1,293,753 will ultimately vest resulting in a combined total of 4,818,876.  Those 4,818,876 shares have a weighted average exercise price of $0.08 and an aggregate intrinsic value of $0 as of December 31, 2021. Stock-based compensation expense related to equity options was approximately $896,000 and $263,000 for the years ended December 31, 2021 and 2020, respectively.

The weighted-average grant-date fair value per share of options granted to employees during the years ended December 31, 2021 and 2020 was $0.06 and $0.12, respectively. At December 31, 2021, the total remaining unrecognized compensation cost related to unvested stock options amounted to approximately $692,000, which will be amortized over the average remaining requisite service period of 2.75 years.

The intrinsic value of options exercised during the years ended December 31, 2021 and 2020 was $0. The intrinsic value of options exercisable at December 31, 2021 and 2020 was $0.  The intrinsic value of options that vested during 2021 was $0. The aggregate intrinsic value for all options outstanding as of December 31, 2021 and 2020 was $0.

The Company periodically issues 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:

	RSUs			Weighted-Average Issuance Price
Balance at December 31, 2020		845,106		$	0.14
Granted		80,977,500
Expired/Cancelled		(540,576	)		0.13
Vested		(262,629	)		0.08
Balance at December 31, 2021		81,019,401			0.13

During the year ended December 31, 2021, the Company granted an aggregate of 80,977,500 RSUs to certain officers, employees, members of the Company’s Board of Directors and certain non-employee contractors. Of these RSU grants, 76,477,500 were issued in exchange for options to purchase 76,477,500 shares of Common Stock held by such persons and 4,500,000 were new issuances to certain members of the Company’s Board of Directors. These RSUs vest 50% on April 1, 2022 with the remainder vesting monthly over a period of 18 months.

The Company determined that the exchange agreements are a modification of a share-based payment award under ASC 718. Accordingly, the Company computed any incremental compensation expense as a component of the total compensation cost to be measured at the modification date. Aggregate incremental compensation expense measured from the modifications of stock options was approximately $1,308,000. Such expense will be amortized over the requisite service period of the RSU agreements.

At January 1, 2021 the Company had 845,106 outstanding RSUs from previous issuances. During the year ended December 31, 2021, 262,629 of these previously issued RSUs vested with the remainder of such RSUs vesting at various times through February 8, 2022. During the year ended December 31, 2020, 2,164,351 RSUs vested.

Stock-based Compensation

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

	Year Ended December 31,
	2021		2020
Cost of revenue	$	29	$	15
General and administrative		842		550
Sales and marketing		336		163
Research and development		321		134
Total	$	1,528	$	862

Common Stock Reserved for Future Issuance

The following table summarizes the Common Stock reserved for future issuance as of December 31, 2021:

	Common Stock
Convertible preferred stock – Series B and Series D		398,269,637
Stock options outstanding		4,818,876
Restricted Stock Units		81,019,401
Warrants outstanding		3,150,000
Authorized for future grant under stock option plans		63,747,077