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7. COMMON STOCK

12 Months Ended

Dec. 31, 2020

Equity [Abstract]

COMMON STOCK

7. COMMON STOCK

At December 31, 2020, the Company’s authorized capital stock was 150,000,000 shares of common stock, par value $0.001 per share, and 25,000,000 shares of preferred stock, par value $0.001 per share. On that date, the Company had issued 50,251,607 shares of common stock, and no shares of preferred stock outstanding.

In 2019, the Company’s shareholders approved the 3Pea International, Inc. 2018 Incentive Compensation Plan (the “2018 Plan”), which was approved by the board of directors on July 18, 2018. The Plan permits the Company to issue awards or options to the officers, directors, employees, consultants and other persons who provide services to our company or any related entity. Pursuant to the 2018 Plan, 5,000,000 shares of the Company’s common stock are reserved for issuance. Any awards or options that are not settled in shares of common stock are not counted against the limit. Stock options granted under the 2018 Plan generally vest over four or five years and expire in ten years. Stock awards granted under the 2018 Plan generally vest over four of five years. In general, if an employee is terminated, any unvested options or awards as of the date of termination will be forfeited. As of December 31, 2020, there were 3,478,533 shares available for future grants under the 2018 Plan.

The Company issues new shares of common stock upon exercise of stock options or vesting stock awards.

Stock-based compensation expense for the years ended December 31, 2020 and 2019 was $2,971,777 and $2,528,613, respectively, and is included in selling, general and administrative expense. As of December 31, 2020, the Company’s unrecognized stock-based compensation expense related to stock options and stock awards was $2,722,518 and $5,117,179, respectively, which are expected to be recognized over a weighted-average period of 2.60 year for stock options and 3.45 years for stock awards.

2020 Transactions: During the year ended December 31, 2020, the Company issued shares of common stock as follows:

·

71,900 shares of common stock were issued related to the exercise of vested stock options and received cash proceeds totaling $172,560.

·

1,581,995 shares of common stock were issued for vested stock awards to employees.

·

20,000 shares of common stock were issued for an asset acquisition.

2019 Transactions: During the year ended December 31, 2019, the Company issued shares of common stock as follows:

·

245,800 shares of common stock were issued related to the exercise of vested stock options and received cash proceeds totaling $430,919.

·

1,891,147 shares of common stock were issued for vested stock awards to employees.

Stock Options

A summary of stock options activity for the years ended December 31, 2020 and 2019 is presented as follows:

										Weighted-
						Weighted-				Average
						Average				Remaining				Aggregate
						Exercise				Contractual				Intrinsic
		Shares				Price				Term (Years)				Value
Outstanding at December 31, 2018			2,707,327			$	2.00
Granted			–				–
Exercised			(245,800	)			1.75
Forfeited/expired			(57,727	)			2.40
Outstanding at December 31, 2019			2,403,800			$	2.01				8.45			$	19,565,450
Granted			500,000				3.87
Exercised			(71,900	)			2.40
Forfeited/expired			(144,200	)			2.91
Outstanding at December 31, 2020			2,687,700			$	2.30				7.74			$	6,294,948
Exercisable at December 31, 2020			896,100			$	1.91				7.42			$	2,445,264

A summary of unvested options activity for the years ended December 31, 2020 and 2019 was as follows:

						Weighted-
						Average
						Grant Date
		Shares				Fair Value
Unvested at December 31, 2018			2,707,327			$	2.00
Granted			–				–
Forfeited/expired			(57,727	)			2.40
Vested			(610,200	)			1.91
Unvested at December 31, 2019			2,039,400			$	2.01
Granted			500,000				3.87
Forfeited/expired			(144,200	)			2.91
Vested			(603,600	)			1.91
Unvested at December 31, 2020			1,791,600			$	2.49

The weighted average grant date fair value of options granted and the total intrinsic value of options exercised for the years ended December 31, 2020 and 2019 is as follows:

		2020				2019
Weighted average grant date fair value of options granted		$	2.86			$	–
Intrinsic value of options exercised		$	370,764			$	2,605,923

The Company uses the Black-Scholes option pricing model to estimate the fair value and compensation cost associated with employee stock options, which requires the consideration of historical employee exercise behavior, the volatility of the Company’s stock price, the weighted-average risk-free interest rate and the weighted-average expected life of the options. Forfeitures are included when they are incurred. Any changes in these assumptions may materially affect the estimated fair value of the share-based award. The weighted-average assumptions used in the Black-Scholes option-pricing model for the year ended December 31, 2020 was a risk-free interest rate of 0.38% consistent with the expected term of the options, expected volatility of 100% based on the historical actual volatility of the Company’s stock, dividend yield of -0- as the Company has no history of paying dividends and the weighted-average expected life of 5 years.

Stock Awards

A summary of stock awards activity for the years ended December 31, 2020 and 2019 was as follows:

						Weighted-
						Average Grant
		Shares				Date Fair Value
Outstanding at December 31, 2018			5,795,000			$	0.94
Granted			576,147				9.50
Forfeited			(170,000	)			4.47
Vested			(1,801,147	)			0.68
Outstanding at December 31, 2019			4,400,000			$	2.06
Granted			254,747				7.80
Forfeited			(792,500	)			4.61
Vested			(1,629,558	)			0.89
Outstanding at December 31, 2020			2,232,689			$	2.70