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Equity Compensation Plans

3 Months Ended

Mar. 31, 2022

Stock Options [Abstract]

EQUITY COMPENSATION PLANS

9. EQUITY COMPENSATION PLANS

In April 2018, the Company adopted the FlexShopper, Inc. 2018 Omnibus Equity Compensation Plan (the “2018 Plan”). The 2018 Plan replaced the Prior Plans. No new awards will be granted under the Prior Plans; however, awards outstanding under the Prior Plans upon approval of the 2018 Plan remain subject to and will be settled with shares under the applicable Prior Plan.

Grants under the 2018 Plan and the Prior Plans consist of incentive stock options, non-qualified stock options, stock appreciation rights, restricted shares, restricted stock units, dividend equivalents and other stock-based awards. Employees, directors and consultants and other service providers are eligible to participate in the 2018 Plan and the Prior Plans.

As of March 31, 2022, the Company granted under its equity compensation plans, stock options and performance share units (the “PSU”) and, approximately 720,000 shares remained available for issuance under the 2018 Plan.

Stock-based compensation expense include the following components:

		Three months ended March 31, 2022				Three months ended March 31, 2021
Stock options		$	291,283			$	380,263
Performance share units			13,946				-
Total stock-based compensation			305,229				380,263

The fair value of stock-based compensation is recognized as compensation expense over the vesting period. Compensation expense recorded for stock-based compensation in the consolidated statement of operations was $305,229 and $380,263 for the three months ended March 31, 2022 and March 31, 2021, respectively. Unrecognized compensation cost related to non-vested options and PSU at March 31, 2022 amounted to approximately $802,271, which is expected to be recognized over a weighted average period of 3.07 years

Stock options:

The fair value of stock-based compensation is recognized as compensation expense by the straight-line method over the vesting period. The Company measured the fair value of each stock option award on the date of grant using the Black-Scholes-Merton (BSM) pricing model with the following weighted average assumptions:

		Three months ended March 31, 2022				Three months ended March 31, 2021
Exercise price		$	1.53 to 1.71			$	2.38 to 2.76
Expected life			6 years				5 years
Expected volatility			66.7	%			93	%
Dividend yield			0	%			0	%
Risk-free interest rate			1.8 to 2.4	%			0.31 to 0.93	%

The expected dividend yield is based on the Company’s historical dividend yield. The expected volatility is based on the historical volatility of the Company’s common stock. The expected life is based on the simplified expected term calculation permitted by the Securities and Exchange Commission (the “SEC”), which defines the expected life as the average of the contractual term of the options and the weighted-average vesting period for all option tranches. The risk-free interest rate is based on the annual yield on the grant date of a zero-coupon U.S. Treasury bond the maturity of which equals the option’s expected life.

Activity in stock options for the three months period ended March 31, 2022 and March 31, 2021 was as follows:

		Number of options				Weighted average exercise price				Weighted average contractual term (years)				Aggregate intrinsic value
Outstanding at January 1, 2022			3,080,904			$	2.06							$	1,923,642
Granted			951,944				1.54								-
Exercised			(162,956	)			.84								204,030
Forfeited			(7,333	)			2.22								2,273
Expired			(25,000	)			1.70								-
Outstanding at March 31, 2022			3,837,559			$	1.98				7.34			$	925,306
Vested and exercisable at March 31, 2022			2,508,822			$	1.25				6.58			$	731,891

Outstanding at January 1, 2021			2,595,700			$	1.92							$	-
Granted			543,397				2.48								-
Exercised			(16,000	)			.81								40,010
Forfeited			(4,667	)			.82								9,564
Outstanding at March 31, 2021			3,118,730			$	2.03				7.39			$	2,681,180
Vested and exercisable at March 31, 2021			1,819,541			$	1.95				7.68			$	2,029,793

The weighted average grant date fair value of options granted during the three month period ended March 31, 2022 and March 31, 2021 was $0.92 and $1.76 per share respectively.

Performance Share Units:

On February 10, 2022, the Compensation Committee of the Board of Directors approved awards of performance share units to certain senior executives of the Company.

For performance share units, which are settled in stock, the number of shares earned is subject to both performance and time-based vesting. For the performance component, the number of shares earned is determined at the end of the periods based upon achievement of specified performance conditions as adjusted EBITDA of the Company. When the performance criteria are met, the award is earned and vests assuming continued employment through the specified service period(s). Shares are issued from the Company’s 2018 Omnibus Equity Compensation Plan upon vesting. The number of performance-based shares which could potentially be issued ranges from 0 up to a maximum of 790,327 of the target awards depending on the specified terms and conditions of the target award.

The fair value of performance share units is based on the fair market value of the Company’s common stock on the date of grant. The compensation expense associated with these awards is amortized on an accelerated basis over the vesting period based on the Company’s projected assessment of the level of performance that will be achieved and earned. In the event the Company determines it is no longer probable that the minimum performance criteria specified in the plan will be achieved, all previously recognized compensation expense is reversed in the period such a determination is made.

Activity in performance share units for the three months ended March 31, 2022 was as follows:

		Number of performance share units				Weighted average grant date fair value
Non- vested at January 1, 2022		-				-
Granted			790,327			$	1.53
Forfeited/ unearned			-				-
Vested			-				-
Non- vested at March 31, 2022			790,327			$	1.53