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STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2021

Share-based Payment Arrangement [Abstract]

15.

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. Options to acquire shares of common stock may be granted at no less than fair market value on the date of grant. 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% of the shares pertaining to the 2015 plan that are outstanding as of the last day of the prior year. As of September 30, 2021, approximately 4.1 million shares are available.

Under the 2015 Stock Incentive Plan, the Company has issued options to purchase approximately 4.0 million shares at an average price of $7.13 with a fair value of approximately $3.29 million. For the nine months ended September 30, 2021 and 2020, the Company issued options to purchase 304,750 and 495,274 shares, respectively. Upon exercise, shares of new common stock are issued by the Company.

For the nine months ended September 30, 2021 and 2020, the Company recognized approximately $13.4 million and $4.7 million, respectively, of non-cash compensation expense (included in general and administrative expense in the accompanying consolidated statements of operations and comprehensive income) 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, 2021, the Company had approximately $9.1 million of unrecognized pre-tax non-cash compensation expense related to options to purchase shares, which the Company expects to recognize, based on a weighted-average period of 2.1 years. The Company used straight-line amortization of compensation expense over the two to three-year requisite service or vesting period of the grant. The Company recognizes forfeitures as they occur. There are options to purchase approximately 2.27 million shares that have vested as of September 30, 2021.

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,
	2021			2020
Expected volatility		69.18%-81.11	%		69.18%-81.11	%
Expected term		4.49-5.00 Years			4.84-5.00 Years
Risk-free interest rate		0.32-1.39	%		0.23% - 1.39	%
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, 2021 and changes during the period ending on that date is as follows:

Schedule of outstanding stock options
				Weighted Average						Weighted
	Shares			Exercise		Grant Date Fair		Aggregate Intrinsic		Average Remaining
	(000’s)			Price		Value		Value (000’s)		Term (Yrs)
Options
At December 31, 2020		5,198		$	4.23			$	240,866		6.89
Granted		305		$	42.37	$	30.32
Exercised		(1,292	)	$	3.84	$	73.91	$	72,192
Forfeiture and cancelled		(242	)	$	6.71
At September 30, 2021		3,969		$	7.13			$	329,231		6.32
Exercisable at September 30, 2021		2,271		$	4.09			$	195,273		5.02

The following table summarizes information about employee stock options outstanding at September 30, 2021:


	Outstanding Options						Vested Options
	Number						Number
	Outstanding		Weighted		Weighted		Exercisable		Weighted		Weighted
Range of	at		Averaged		Averaged		at		Averaged		Averaged
Exercise	September 30,		Remaining		Exercise		September 30,		Exercise		Remaining
Price	2021 (000’s)		Life		Price		2021 (000’s)		Price		Life
$0.20 - $0.53		20		2.33	$	0.34		20	$	0.34		2.33
$0.65 - $1.80		100		3.41	$	1.05		100	$	1.05		3.41
$1.83 - $2.84		112		4.27	$	1.97		112	$	1.97		4.27
$3.20 - $6.20		3,354		6.17	$	4.10		2.019		4.29		5.13
$7.20-$60.00		383		9.18		37.04		20		14.53		8.84
Outstanding options		3,969		6.32	$	7.13		2.271	$	4.09		5.02

As of September 30, 2021, the Company had approximately $9.1 million of unrecognized pre-tax non-cash compensation expense related to options to purchase shares, which the Company expects to recognize, based on a weighted-average period of 2.1 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 holders of a restricted stock award are generally entitled after the release to transact and obtain the same rights as rights of a shareholder of the Company, including the right to vote the shares. The holders of unvested restricted stock awards do not have the same rights as shareholders including but not limited to any dividends which may be declared by the Company, and do not have the right to vote. The value of restricted stock awards that vest over time is 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, 2021 and 2020 is presented in the following table:

Schedule of restricted stock activity

For the nine months ended

September 30,
2021 September 30,
2020

Weighted Weighted

Average Average

Grant Date Grant Date

Shares Fair Value Shares Fair Value

Unvested at beginning of period 66,229 $ 28.11 90,000 $ 3.23

Transfers to restricted stock units (45,871 ) 34.02 - -

Granted 92,444 14.72

Vested (19,429 ) 14.79 (18,582 ) 14.72

Forfeiture and cancelled (671 ) 14.72 - -

Unvested at end of period 258 $ 14.72 163,862 $ 8.41

The total fair value of shares vested during the nine months ended September 30, 2021 and 2020 was $1.3 million and $0.5 million, respectively. Unrecognized compensation expense related to outstanding restricted stock awards to employees and directors as of September 30, 2021 was $1,600 and is expected to be expensed over the next ten10 months.

Restricted Stock Units

Restricted stock units are awards that give the holder the right to receive one share of common stock for each restricted stock unit upon meeting service-based vesting conditions (typically annual vesting in three equal annual installments, with a requirement that the holder remains in the continuous employment of the Company). The holders of unvested units do not have the same rights as shareholders including but not limited to any dividends which may be declared by the Company, and do not have the right to vote. The value of restricted stock units that vest over time is established by the market price on the date of its grant. A summary of the Company’s restricted stock unit activity for the nine months ended September 30, 2021 and 2020 is presented in the following table:

	For the nine months ended
	September 30, 2021					September 30, 2020
				Weighted				Weighted
				Average				Average
				Grant Date				Grant Date
	Shares			Fair Value		Shares		Fair Value
Unvested at beginning of period		-		$	-		-	$	-
Transfers from restricted stock awards		45,871			34.02		-
Granted		546,525			52.27		-		-
Vested		(1,334	)		69.63		-		-
Forfeiture and cancelled		(14,900	)		50.67
Unvested at end of period		576,162		$	50.82		-	$	-

The total fair value of shares vested during the nine months ended September 30, 2021 was $90,000. Unrecognized compensation expense related to outstanding restricted stock units to employees and directors as of September 30, 2021 was $20.8 million and is expected to be expensed over the next 2.6 years.