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Stock Options

12 Months Ended

Dec. 31, 2021

10. Stock Options

On June 7, 2016, stockholders of the Company approved amendments to the Innodata Inc. 2013 Stock Plan (as amended, the “Plan”). The number of shares of common stock of Innodata Inc. that may be delivered, purchased or used for reference purposes (with respect to stock appreciation rights or stock units) for awards granted under the Plan after June 7, 2016 is 5,858,892 (the Share Reserve). Shares subject to an option or stock appreciation right granted under the Plan after June 7, 2016 count against the Share Reserve as one share for every share granted, and shares subject to any other type of award granted under the Plan after June 7, 2016 count against the Share Reserve as two shares for every share granted. Any award, or portion of an award, under the Plan or under the Company’s 2009 Stock Plan (as amended and restated (the Prior Plan)) that expires or terminates unexercised, becomes unexercisable or is forfeited or otherwise terminated, surrendered or canceled as to any shares without delivery of shares or other consideration will be added back to the Share Reserve as one share for each such share that was subject to an option or stock appreciation right granted under the Plan or the Prior Plan, and two shares for each such share that was subject to an award other than an option or stock appreciation right granted under the Plan or the Prior Plan. If any shares are withheld, tendered or exchanged by a participant in the Plan as full or partial payment to Innodata of the exercise price under an option under the Plan or the Prior Plan or in satisfaction of a participant’s tax withholding obligations with respect to any award under the Plan or the Prior Plan, there will be added back to the Share Reserve one share for each such share that was withheld, tendered or exchanged in respect of an option or stock appreciation right granted under the Plan or the

Prior Plan, and two shares for each such share that was withheld, tendered or exchanged in respect of an award other than an option or stock appreciation right granted under the Plan or the Prior Plan.

On June 8, 2021, stockholders of the Company approved the Innodata Inc. 2021 Equity Compensation Plan (the “2021 Plan”). The number of shares of common stock of Innodata Inc. that may be delivered, purchased or used for reference purposes (with respect to stock appreciation rights or stock units) for awards granted under the 2021 Plan is 1,800,000 (the “Share Reserve”). Shares subject to an option or stock appreciation right granted under the 2021 Plan count against the Share Reserve as one share for every share granted, and shares subject to any other type of award granted under the 2021 Plan count against the Share Reserve as two shares for every share granted. Any shares withheld, tendered or exchanged by a participant in the 2021 Plan as full or partial payment to Innodata of the exercise price under an option under the 2021 Plan or in satisfaction of a participant’s tax withholding obligations with respect to any award under the 2021 Plan, will not be added back to the Share Reserve.

The fair value of stock options is estimated on the date of grant using the Black-Scholes option pricing model. The weighted-average fair value of the options granted and weighted-average assumptions were as follows:


	For the Years Ended December 31,
	2021			2020

Weighted average fair value of options granted	$	3.73		$	0.61
Risk-free interest rate		0.22% - 0.82	%		0.29%-0.56	%
Expected life (years)		3-6			5-6
Expected volatility factor		58% - 68	%		46.75%-50.09	%
Expected dividends		None			None

The Company estimates the risk-free interest rate using the U.S. Treasury yield curve for periods equal to the expected term of the options in effect at the time of grant. The expected term of options granted is based on a combination of vesting schedules, term of the options and historical experience. Expected volatility is based on historical volatility of the Company’s common stock. The Company uses an expected dividend yield of zero since it has never declared or paid any dividends on its capital stock.

A summary of option activity under the Plans as of December 31, 2021, and changes during the years ended December 31, 2021 and 2020, is presented below:


				Weighted-Average
		Weighted -Average		Remaining
	Number of	Exercise		Contractual Term	Aggregate
	Options	Price		(years)	Intrinsic Value
Outstanding at January 1, 2020	6,828,303	$	1.86
Granted	1,080,000		1.37
Exercised	(1,357,116)		1.97
Forfeited/Expired	(644,303)		3.06
Outstanding at December 31, 2020	5,906,884	$	1.61	6.86	$	89,405
Granted	1,226,300		6.84
Exercised	(1,556,288)		2.01
Forfeited/Expired	(40,000)		1.41
Outstanding at December 31, 2021	5,536,896	$	2.66	7.52	$	19,154,463

Exercisable at December 31, 2021	3,266,872	$	1.68	6.69	$	13,943,444

Vested and Expected to Vest at December 31, 2021	5,536,896	$	2.66	7.52	$	19,154,463

The total compensation cost related to non-vested stock options not yet recognized as of December 31, 2021 totals approximately $3.9 million. The weighted-average period over which these costs will be recognized is twenty-eight months.

A summary of restricted shares under the Company’s Plan as of December 31, 2021 and 2020 are presented below:


		Weighted-Average
		Grant Date Fair
	Number of Shares	Value

Outstanding January 1, 2020	75,000	$	1.38
Granted	-
Vested	(25,000)
Unvested at December 31, 2020	50,000
Granted	-
Vested	(25,000)
Forfeited/Expired	-
Unvested at December 31, 2021	25,000	$	1.38

Subsequent Event

On March 10, 2022 the Company granted 1,359,558 stock options to certain Company executive officers and a director under a long term incentive arrangement. The stock options were granted pursuant to the terms of the Company’s 2013 Stock Plan (As Amended and Restated Effective June 7, 2016). The stock options have an exercise price of $4.99, a term of ten years from the date of grant, vest in their entirety on January 1, 2025, and have a grant date fair value of approximately $4.0 million.