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STOCK-BASED COMPENSATION
 9 Months Ended
Sep. 30, 2021
Share-based Payment Arrangement [Abstract]  
STOCK-BASED COMPENSATION

NOTE 11. STOCK-BASED COMPENSATION

 

The Company recorded pretax compensation expense related to the grant of stock options and restricted stock issued of $491,950 and $498,356 for the three months ended September 30, 2021 and 2020 and $1,148,327 and $1,186,771 for the nine months ended September 30, 2021 and 2020, respectively.

 

As of September 30, 2021, the Company had adopted nine separate stock option and restricted stock plans: (i) the 2005 Stock Option and Restricted Stock Plan (the “2005 Plan”), (ii) the 2006 Stock Option and Restricted Stock Plan (the “2006 Plan”), (iii) the 2007 Stock Option and Restricted Stock Plan (the “2007 Plan”), (iv) the 2008 Stock Option and Restricted Stock Plan (the “2008 Plan”), (v) the 2011 Stock Option and Restricted Stock Plan (the “2011 Plan”), (vi) the 2013 Stock Option and Restricted Stock Plan (the “2013 Plan”), (vii) the 2015 Stock Option and Restricted Stock Plan (the “2015 Plan”), (viii) the 2018 Stock Option and Restricted Stock Plan (the “2018 Plan”) and (ix) the 2020 Stock Option and Restricted Stock Plan (the “2020 Plan”).. The 2005 Plan, 2006 Plan, 2007 Plan, 2008 Plan, 2011 Plan, 2013 Plan, 2015 Plan, 2018 Plan and 2020 Plan are referred to as the “Plans.”

 

These Plans permit the grant of stock options or restricted stock to its employees, non-employee directors and others for up to a total of 5,675,000 shares of common stock. The 2005 Plan terminated during 2015 with 20,178 shares not awarded or underlying options, which shares are now unavailable for issuance. Stock options granted under the 2005 Plan that remain unexercised and outstanding as of September 30, 2021 total 7,064. The 2006 Plan terminated during 2016 with 35,474 shares not awarded or underlying options, which shares are now unavailable for issuance. Stock options granted under the 2006 Plan that remain unexercised and outstanding as of September 30, 2021 total 30,125. The 2007 Plan terminated during 2017 with 94,651 shares not awarded or underlying options, which shares are now unavailable for issuance. The 2008 Plan terminated during 2018 with 40,499 shares not awarded or underlying options, which shares are now unavailable for issuance. There were no stock options granted under the 2008 Plan that remain unexercised and outstanding as of September 30, 2021.

 

 

The Company believes that such awards better align the interests of our employees with those of its stockholders. Option awards have been granted with an exercise price equal to the market price of its stock at the date of grant with such option awards generally vesting based on the completion of continuous service and having ten-year contractual terms. These option awards typically provide for accelerated vesting if there is a change in control (as defined in the Plans). The Company has registered all shares of common stock that are issuable under its Plans with the SEC. A total of 1,091,438 shares remained available for awards under the various Plans as of September 30, 2021.

 

On July 8, 2020, the Company’s board of directors approved the grant of options to purchase 300,000 shares of Common Stock at an exercise price of $1.67 per of which (i) options to purchase 75,000 shares of Common Stock were fully vested at the time of grant and (ii) options to purchase 225,000 shares of Common Stock are subject to vesting ratably on a quarterly basis through May 31, 2022.

 

The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model.

 

Activity in the various Plans during the nine months ended September 30, 2021:

 

Options 

Number of

Shares

  

Weighted

Average

Exercise Price

 
Outstanding at December 31, 2020   838,313   $3.20 
Granted   300,000    1.67 
Exercised   —    — 
Forfeited   (46,875)   (12.13)
Outstanding at September 30, 2021   1,091,438   $2.39 
Exercisable at September 30, 2021   866,438   $2.58 

 

The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model. The total estimated grant date fair value stock options issued during the nine months ended September 30, 2021 was $466,831. Following are certain estimates and assumptions utilized as of the issuance date to determine the grant-date fair value of the stock options issued during 2021:

 

Volatility – range   113.47%
Risk-free rate   1.3%
Contractual term   10.0 years 
Exercise price  $1.67 

 

The Plans allow for the cashless exercise of stock options. This provision allows the option holder to surrender/cancel options with an intrinsic value equivalent to the purchase/exercise price of other options exercised. There were no shares surrendered pursuant to cashless exercises during the nine months ended September 30, 2021 and 2020.

 

The aggregate intrinsic value of options outstanding was $-0-, and the aggregate intrinsic value of options exercisable was $-0- at September 30, 2021 and December 31, 2020.

 

As of September 30, 2021, the unrecognized portion of stock compensation expense on all existing stock options was $350,123.

 

The following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable options under the Company’s option plans as of September 30, 2021:

 

    Outstanding options   Exercisable options 
Exercise price range   Number of options   Weighted average remaining contractual life   Number of  options   Weighted average remaining contractual life 
                  
$0.01 to $2.49    715,000    8.8 years    490,000    8.4 years 
$2.50 to $3.49    310,313    6.6 years    310,313    6.6 years 
$3.50 to $4.49    45,750    3.4 years    45,750    3.4 years 
$4.50 to $6.99    15,000    0.3 years    15,000    0.3 years 
$7.00 to $9.52    5,375    0.1 years    5,375    0.1 years 
                       
      1,091,438    7.8 years    866,438    7.3 years 

 

 

Restricted stock grants. The Board of Directors has granted restricted stock awards under the Plans. Restricted stock awards are valued on the date of grant and have no purchase price for the recipient. Restricted stock awards typically vest over one to four years corresponding to anniversaries of the grant date. Under the Plans, unvested shares of restricted stock awards may be forfeited upon the termination of service to or employment with the Company, depending upon the circumstances of termination. Except for restrictions placed on the transferability of restricted stock, holders of unvested restricted stock have full stockholder’s rights, including voting rights and the right to receive cash dividends.

 

A summary of all restricted stock activity under the equity compensation plans for the nine months ended September 30, 2021 is as follows:

 

  

Number of

Restricted

shares

  

Weighted

average

grant date

fair

value

 
Nonvested balance, December 31, 2020   720,125   $1.69 
Granted   856,000    2.07 
Vested   (505,250)   (1.95)
Forfeited   (7,500)   (1.08)
Nonvested balance, September 30, 2021   1,063,375   $1.87 

 

The Company estimated the fair market value of these restricted stock grants based on the closing market price on the date of grant. As of September 30, 2021, there were $1,354,329 of total unrecognized compensation costs related to all remaining non-vested restricted stock grants, which will be amortized over the next 60 months in accordance with their respective vesting scale.

 

The nonvested balance of restricted stock vests as follows:

 

Years ended 

Number of

shares

 
     
2021 (October 1, 2021 through December 31, 2021)   6,000 
2022   585,375 
2023   358,000 
2024   54,000 
2025   30,000 
2026   30,000