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Stock-Based Compensation

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

16.

STOCK-BASED COMPENSATION

The Company adopted an Incentive Stock Plan on January 18, 2007. This plan is intended to provide incentives which will attract and retain highly competent persons at all levels as employees of the Company, as well as independent contractors providing consulting or advisory services to the Company, by providing them opportunities to acquire the Company’s common stock or to receive monetary payments based on the value of such shares pursuant to Awards issued. While the plan terminates 10 years after the adoption date, issued options have their own schedule of termination. During 2013, the majority of the shareholders approved to increase the total available shares in the plan from 2.5 million to 3.5 million shares of common stock. During May 2014, the majority of the shareholders approved to increase the total available shares in the plan from 3.5 million to 4.25 million shares of common stock, during February 2015, the majority of the shareholders approved to increase the total available shares in the plan from 4.25 million to 4.6 million shares of common stock and during April 2015, the majority of the shareholders approved to increase the total available shares in the plan from 4.6 million to 5.1 million shares of common stock. Upon exercise, shares of new common stock are issued by the Company.

The Company adopted the 2015 Stock Incentive Plan on April 30, 2015. This plan is intended to provide incentives which will attract and retain highly competent persons at all levels as employees of the Company, as well as independent contractors providing consulting or advisory services to the Company, by providing them opportunities to acquire the Company’s common stock or to receive monetary payments based on the value of such shares pursuant to Awards issued. The 2015 Plan permits the grant of options and shares for up to 5,000,000 shares. In addition, there is a provision for an annual increase of 15% to the shares included under the plan, with the shares to be added on the first day of each calendar year, beginning on January 1, 2017. As of September 30, 2020, 880,000 shares are available.

Under the 2015 Stock Option Plan the Company has options outstanding to purchase approximately 5.6 million shares at an average price of $4.08 per share with a fair value of $94.2 million. For the nine months ended September 30, 2020 and 2019, the Company issued options to purchase 495,274 and 1.68 million shares. For the nine months ended September 30, 2020 and 2019, the Company recognized an expense of approximately $4,719,000 and $3,354,295 respectively, of non-cash compensation expense (included in General and Administrative expense in the accompanying Consolidated Statement of Operations) determined by application of a Black Scholes option pricing model with the following inputs: exercise price, dividend yields, risk-free interest rate, and expected annual volatility. As of September 30, 2020, the Company had approximately $6,786,000 of unrecognized pre-tax non-cash compensation expense, which the Company expects to recognize, based on a weighted-average period of 3 years. The Company used straight-line amortization of compensation expense over the two to nine-year requisite service or vesting period of the grant. There are options to purchase approximately 2.78 million shares that are vested as of September 30, 2020.

The Company uses the Black-Scholes option-pricing model to estimate the fair value of its stock option awards and warrant issuances. The calculation of the fair value of the awards using the Black - Scholes option-pricing model is affected by the Company’s stock price on the date of grant as well as assumptions regarding the following:

	Nine months ended September 30,
	2020			2019
Expected volatility		69.18%-81.11	%		58.62%-121.32	%
Expected term		4.84-5.00 Years			4.02-5.00 Years
Risk-free interest rate		0.23% - 1.39	%		1.79% - 2.72	%
Forfeiture Rate		0.00	%		0.00	%

The expected volatility was determined with reference to the historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury rate in effect at the time of grant.

A summary of the status of the Company’s outstanding stock options as of September 30, 2020 and changes during the period ending on that date is as follows:

				Weighted Average		Aggregate Intrinsic		Average
	Shares			Exercise		Value		Remaining
	(000’s)			Price $		($ 000’s)		Term (Yrs)
Options
Balance at December 31, 2019		6,528		$	3.55	$	8,978		6.58
Granted		495		$	7.07
Exercised		(1,293	)	$	2.40
Forfeiture and cancelled		(141	)	$	3.94
Balance at September 30, 2020		5,589		$	4.08	$	94,174		6.41

Exercisable at September 30, 2020		2,785		$	3.79

The following table summarizes information about employee stock options outstanding at September 30, 2020:

	Outstanding Options						Vested Options
	Number						Number
	Outstanding						Exercisable
	At		Weighted		Weighted		at		Weighted		Weighted
	September 30,		Average		Average		September 30,		Average		Average
	2020		Remaining		Exercise		2019		Exercise		Remaining
Range of Exercise Price	(000’s)		Term		Price $		(000’s)		Price $		Term
$0.20 - $0.53		130		2.34	$	0.27		130	$	0.27		2.34
$0.65 - $1.80		49		4.15	$	1.05		49	$	1.05		4.15
$1.83 - $2.84		258		0.75	$	1.97		258	$	1.97		0.75
$3.20 - $6.20		5,089		6.79	$	4.19		2,347		4.24		5.60
$7.20 - $22.00		63		9.58	$	14.53		0	$	0		0
Outstanding options		5,589		6.41	$	4.08		2,785	$	3.79		4.97

As of September 30, 2020, the Company had approximately $6,786,000 of unrecognized pre-tax non-cash compensation expense, which the Company expects to recognize, based on a weighted-average period of 3 years.

Restricted Stock Awards

Restricted stock awards are awards of common stock that are subject to restrictions on transfer and to a risk of forfeiture if the holder leaves the Company before the restrictions lapse. The holder of a restricted stock award is generally entitled at all times on and after the date of issuance of the restricted shares to exercise the rights of a shareholder of the Company, including the right to vote the shares. The value of stock awards that vest over time was established by the market price on the date of its grant. A summary of the Company’s restricted stock activity for the nine months ended September 30, 2020 and 2019 is presented in the following table:

	For the Nine Months ended
	September 30, 2020					September 30, 2019
				Weighted				Weighted
				Average				Average
				Grant Date				Grant Date
	Shares			Fair Value		Shares		Fair Value
Unvested at beginning of period		90,000		$	3.23		38,889	$	-
Granted		92,444			14.72		-		-
Vested		(18,582	)		14.72		8,333		-
Unvested at end of period		163,862		$	8.41		30,556	$	3.64

Unrecognized compensation expense related to outstanding restricted stock awards to employees and directors as of September 30, 2020 was $614,870, and expected to be expensed over the next 18 months.