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Stock Options and Restricted Stock Units

6 Months Ended

Jun. 30, 2022

Stock Options and Restricted Stock Units

Stock Options and Restricted Stock Units

5. Stock Options and Restricted Stock Units

A summary of option activity under the Innodata Inc. 2013 Stock Plan, as amended and restated effective June 7, 2016 (the “2013 Plan”) and changes during each of the six-month periods ended June 30, 2022 and 2021 are presented below:


				Weighted -			Weighted-Average
		Number of		Average Exercise			Remaining Contractual		Aggregate
		Options		Price			Term (years)		Intrinsic Value
Outstanding at January 1, 2021		5,906,884		$	1.61
Granted		360,000			6.40
Exercised		(1,245,182)			2.12
Forfeited/Expired		(20,000)			1.38
Outstanding at June 30, 2021		5,001,702		$	1.83		7.60		$	25,837,675

Exercisable at June 30, 2021		3,425,983		$	1.62		7.12		$	18,426,406

Vested and Expected to Vest at June 30, 2021		5,001,702		$	1.83		7.60		$	25,837,675


							Weighted-Average
		Number of		Weighted - Average			Remaining Contractual		Aggregate
		Options		Exercise Price			Term (years)		Intrinsic Value
Outstanding at January 1, 2022		5,536,896		$	2.66
Granted		1,479,558			5.21
Exercised		(146,705)			1.22
Forfeited/Expired		(36,000)			5.13
Outstanding at June 30, 2022		6,833,749		$	3.24		7.62		$	13,923,020

Exercisable at June 30, 2022		3,578,045		$	1.81		6.40		$	11,195,079

Vested and Expected to Vest at June 30, 2022		6,833,749		$	3.24		7.62		$	13,923,020

A summary of option activity under the Innodata Inc. 2021 Stock Plan and changes during the six-month period ended June 30, 2022 are presented below:


							Weighted-Average
		Number of		Weighted - Average			Remaining Contractual		Aggregate Intrinsic
		Options		Exercise Price			Term (years)		Value
Outstanding at January 1, 2022		-		$	-
Granted		25,000			6.40
Exercised		-			-
Forfeited/Expired		-			-
Outstanding at June 30, 2022		25,000		$	6.40		5.00		$	-

Exercisable at June 30, 2022		-		$	-

Vested and Expected to Vest at June 30, 2022		25,000		$	6.40		5.00		$	-

During the six months ended June 30, 2022, a total of 146,705 options were exercised at an average price of $1.22.

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 Six Months Ended June 30,
		2022			2021
Weighted average fair value of options granted		$	3.10		$	3.33
Risk-free interest rate			1.94%-2.75%			0.22%-0.82%
Expected term (years)			3.0-6.42			3-6
Expected volatility factor			62% - 76.48%			59.62%
Expected dividends			-			-

A summary of restricted stock units issued under the 2013 Plan and the 2021 Plan (collectively, the “Equity Plans”) is presented below:

In March 2022, the Company granted restricted stock units (“RSU”) to key executives, pursuant to the Equity Plans. Each RSU has vesting conditions based on both the achievement of performance-based metrics and the continuation of employment over a defined period. The level of performance determines the number of RSUs that performance-vest, and performance vested RSUs must also time-vest in order to be fully vested. Each fully-vested RSU represents the right to receive one share of the Company’s common stock or the fair market value of one share of common stock, at the Company’s discretion, and is classified as an equity award. Each RSU vests pursuant to the vesting schedule found in the respective RSU agreement. RSUs are generally subject to graduated vesting schedules and stock-based compensation expense is computed by tranche and recognized on a straight-line basis over the tranches’ applicable vesting period based on the expected achievement level. The fair value of restricted stock units is estimated on the date of grant using the Binomial option pricing model.

Restricted stock unit activity during the six months ended June 30, 2022 was as follows:


		Number of Restricted		Weighted-Average Grant
		Stock Awards		Date Fair Value
Unvested at January 1, 2022		25,000		$	1.38
Granted		-			-
Vested		(25,000)			1.38
Forfeited/Expired		-			-
Unvested at June 30, 2022		-		$	-


		Number of		Weighted-Average
		Restricted Stock		Grant Date
		Units		Fair Value
Unvested at January 1, 2022		-		$	-
Granted*		700,000			5.59
Vested		-			-
Forfeited/Expired		-
Unvested at June 30, 2022		700,000		$	5.59

* 200,000 RSUs were issued under the 2013 Plan and 500,000 RSUs were issued under the 2021 Plan

The compensation cost related to non-vested stock options not yet recognized as of June 30, 2022 totaled approximately $7.1 million. The weighted-average period over which these costs will be recognized is 27 months.

During the six months ended June 30, 2022, 700,000 performance-based restricted stock units were granted and remain non-vested at June 30, 2022. Vesting of the performance-based restricted stock units is contingent on the achievement of certain financial performance goals and service vesting conditions. There were no restricted stock units granted during the three months ended June 30, 2022.

The compensation cost related to non-vested restricted stock units not yet recognized as of June 30, 2022 totaled approximately $3.0 million. The weighted-average period over which these costs will be recognized is 24 months.

The stock-based compensation expense related to the Equity Plans were allocated as follows (in thousands):


		For the Three Months Ended						For the Six Months Ended
		June 30,						June 30,
		2022			2021			2022			2021
Direct operating costs		$	56		$	37		$	107		$	75
Selling and administrative expenses			972			299			1,458			539
Total stock-based compensation		$	1,028		$	336		$	1,565		$	614