Annual report pursuant to Section 13 and 15(d)

Stock Options, Warrants and Restricted Common Stock

v3.20.1
Stock Options, Warrants and Restricted Common Stock
12 Months Ended
Dec. 31, 2019
Share-based Payment Arrangement [Abstract]  
Stock Options, Warrants and Restricted Common Stock

Note 12.  Stock Options, Warrants and Restricted Common Stock

 

During the year ended December 31, 2019, the Company’s shareholders approved its 2019 Equity Incentive Plan (the “2019 Plan”), which reserves a total of 3,600,000 shares of the Company’s common stock plus the remaining shares reserved under the Company’s 2017 Equity Incentive Plan. On December 5, 2019 the Company registered 3,930,603 shares of common stock under the 2019 Plan. The Company currently provides stock-based compensation to employees, directors and consultants, under the Company's 2019 Plan, as approved by the Company's shareholders and non-qualified options and warrants issued outside of the Plan. 

 

Stock-based Compensation

 

The Company’s stock-based compensation expenses recognized during the years ended December 31, 2019 and 2018, were attributable to selling, general and administrative expenses, which are included in the accompanying consolidated statements of operations.

 

The Company recognized total stock-based compensation expense during the years ended December 31, 2019 and 2018, from the following categories (in thousands):

 

    Years Ended December 31,
    2019   2018
Restricted stock awards under the Plan   $ 687     $ 3,972  
Stock option awards under the Plan     58       688  
    Total stock-based compensation   $ 745     $ 4,660  

 

Restricted common stock awards

 

A summary of the Company's restricted stock activity in the years ended December 31, 2019 and 2018 is as follows:

 

    Number of Shares   Weighted Average Grant-Date
 Fair Value
  Unvested at January 1, 2018       496,152     $ 5.97  
       Granted       431,000     $ 10.46  
       Vested       (530,065 )   $ 7.61  
       Forfeited       (301,148 )   $ 7.68  
  Unvested at December 31, 2018       95,939     $ 12.49  
       Vested       (58,772 )   $ 7.66  
       Granted       1,542,332     $ 1.41  
       Forfeited       (55,000 )   $ 14.95  
  Unvested at December 31, 2019       1,524,499     $ 1.37  

 

The value of restricted common stock grants are measured based on their fair market value on the date of grant and amortized over their respective vesting periods. As of December 31, 2019, there was approximately $1.8 million of unrecognized compensation cost related to unvested restricted common stock rights, which is expected to be recognized over a remaining weighted-average vesting period of approximately three months.

 

Stock Incentive Plan Options

 

The Company estimates the fair value of the share-based option awards on the date of grant using the Black-Scholes option-pricing model (the “Black-Scholes model”).  Using the Black-Scholes model, the value of the award that is ultimately expected to vest is recognized over the requisite service period in the statement of operations. The Company attributes compensation to expense using the straight-line single option method for all options granted. 

The Company's determination of the estimated fair value of share-based payment awards on the date of grant under the Plan is affected by the following variables and assumptions:

 

The grant date exercise price – the closing market price of the Company's common stock on the date of the grant;
Expected option term – based on historical experience with existing option holders estimated at 3-5 years;
Estimated dividend rates – based on historical and anticipated dividends over the life of the option;
Legal term of the option – grants have legal lives of 10 years;
Risk-free interest rates – with maturities that approximate the expected life of the options granted;
Calculated stock price volatility – calculated over the expected life of the options granted, which is calculated based on the daily closing price of the Company's common stock over the period commencing in mid-2017 when the Company changed its strategic focus; and
Option exercise behaviors – based on actual and projected employee stock option exercises and forfeitures.
The Company accounts for forfeitures as they occur.

 

The Company currently provides stock-based compensation to employees, directors and consultants under the Plan.  There were no stock options issued during the year ended December 31, 2019. The Company utilized assumptions in the estimation of fair value of stock-based compensation for the year ended December 31, 2018, as follows: 

 

  December 31,
  2018
Dividend yield 0%
Expected price volatility 152% - 159%
Risk free interest rate 2.49% - 2.96%
Expected term 5 years

 

A summary of stock option activity under the Plan for options to employees, officers, directors and consultants, for the years ended December 31, 2019 and 2018, is presented below:

 

    Shares Underlying Options   Weighted Average Exercise Price   Weighted Average Remaining Contractual
 Term (Years)
  Aggregate Intrinsic Value
  Outstanding at January 1, 2018       119,533     $ 9.02                  
       Granted       62,000     $ 15.71                  
       Exercised       (19,533 )   $ 4.02                  
       Forfeited       (100,000 )   $ 10.00                  
  Outstanding at December 31, 2018       62,000     $ 15.71       9.2          
       Granted       —       $ —                    
       Exercised       —       $ —                    
       Forfeited       (50,000 )   $ 18.50                  
  Outstanding at December 31, 2019       12,000     $ 4.09       3.7     $ —    
                                     
  Exercisable at December 31, 2019       12,000     $ 4.09       3.7     $ —    

 

 

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company's closing stock price on December 31, 2019 and 2018, and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders, had all option holders been able to, and in fact had, exercised their options on December 31, 2019 and 2018, respectively.

 

As of December 31, 2018, total stock-based compensation expense related to unvested options not yet recognized totaled approximately $58,000, which was fully amortized in the first quarter of 2019.

 

Other common stock purchase warrants

 

As of December 31, 2019, the Company had outstanding 3,574,257 warrants issued in connection with offerings.  The following is a summary of the change in outstanding warrants during the years ended December 31, 2019 and 2018:

 

    Shares Underlying Options/Warrants   Weighted Average Exercise Price   Weighted Average Remaining Contractual
 Term (Years)
  Aggregate Intrinsic Value
  Outstanding at January 1, 2018       1,944,895     $ 35.06       2.7     $ 6,135,000  
     Issued       —       $ —         —            
     Exercised       (113,009 )   $ 3.50       —            
     Forfeited       (160,773 )   $ 10.88       —            
  Outstanding at December 31, 2018       1,671,113     $ 39.47       2.0     $ —    
     Issued       1,908,144     $ 1.94       5.2          
     Forfeited       (5,000 )   $ 7.90       —            
  Outstanding at December 31, 2019       3,574,257     $ 19.48       2.9     $ —    
                                     
  Exercisable at December 31, 2019       3,574,257     $ 19.48       2.9     $ —    

 

The Company issued Warrants to purchase 1,908,144 shares of its common stock with an exercise price of $1.94, in connection with the Notes issued on January 28, 2019. During the year ended December 31, 2018, 13,009 of the warrants issued in the May 2013 private offering were exercised on a cashless basis for the issuance of 3,215 shares of common stock, 100,000 warrants issued in March 2018, were exercised for cash proceeds of approximately $0.4 million and 160,773 warrants were forfeited.

 

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company's closing stock price on December 31, 2019 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders, had all option holders been able to, and in fact had, exercised their options on December 31, 2019.