Quarterly report pursuant to Section 13 or 15(d)

Stock Award Plans and Stock-Based Compensation

v3.22.1
Stock Award Plans and Stock-Based Compensation
3 Months Ended
Mar. 31, 2022
Share-based Payment Arrangement [Abstract]  
Stock Award Plans and Stock Based Compensation Stock Award Plans and Stock-Based CompensationIn September 2011, the Company adopted the 2011 Employee Stock Incentive Plan (the “2011 Plan”) which provides for the granting of incentive and non-statutory common stock options and stock based incentive awards to employees, non-employee directors, consultants and independent contractors. The plan was terminated by its terms on August 31, 2021 and and no new awards will be issued under the 2011 Plan.
In February 2018, the Company adopted the 2018 Employee Stock Incentive Plan (the “2018 Plan” and together with the 2011 Plan, the “Option Plans”), which is utilized for employees, corporate officers, directors, consultants and other key persons employed. The 2018 Plan provides for the granting of incentive stock options, NQSOs, stock grants and other stock-based awards, including Restricted Stock and Restricted Stock Units (as defined in the 2018 Plan).
Incentive stock options granted under the Option Plans are granted at exercise prices not less than 100% of the estimated fair market value of the underlying common stock at date of grant. The exercise price per share for incentive stock options may not be less than 110% of the estimated fair value of the underlying common stock on the grant date for any individual possessing more that 10% of the total outstanding common stock of the Company. Options granted under the Option Plans vest over periods ranging from immediately to four years and are exercisable over periods not exceeding ten years.
The aggregate number of shares that may be awarded under the 2018 Plan as of March 31, 2022 is 43,000,000. As of March 31, 2022, 31,678,907 of stock options and restricted stock were granted to employees, directors and consultants of the Company (including 1 share outside of our plan and 70 under our 2011 Plan) and 11,321,164 options were available for future grant under the 2018 Plan.
Employee Stock Options
During the three months ended March 31, 2021, the Company granted options under the 2018 Plan for the purchase of 1,605,000 shares of common stock to employees and consultants of the Company. These options are 100% vested or vest pro-rata over 12, 24 or 36 months, have a life of ten years and an exercise price of $1.83 per share. The Company valued the stock options using the Black-Scholes option valuation model and the fair value of the awards was determined to be approximately $1.0 million. The fair value of the common stock as of the grant date was determined to be $1.83 per share.
On February 5, 2021, the Company issued 4,977 shares of common stock in connection with the cashless exercise of 14,583 employee stock options.
On June 10, 2021, the Company issued 414 shares of common stock in connection with the cashless exercise of 6,111 employee stock options.
During the three months ended March 31, 2022, the Company granted options under the 2018 Plan for the purchase of 9,945,000 shares of common stock to employees and consultants of the Company. These options are 100% vested or vest pro-rata over 12 or 48 months, have a life of ten years and an exercise price of $0.53 per share. The Company valued the stock options using the Black-Scholes option valuation model and the fair value of the awards was determined to be approximately $1.8 million. The fair value of the common stock as of the grant date was determined to be $0.53 per share.
During the three months ended March 31, 2022 and 2021, the Company recorded a charge for the amortization of stock options of approximately $0.9 million and $0.5 million, respectively, which is included in the general and administrative section of the condensed consolidated statement of operations.
As of March 31, 2022, the fair value of non-vested stock options totaled approximately $4.7 million, which will be amortized to expense over the weighted average remaining term of 1.21 years.
See below for a summary of the stock options granted under the 2011 and 2018 plans:
2011 Plan 2018 Plan Non Plan Total
Beginning balance as of January 1, 2022 73  18,882,229  18,882,303 
Granted —  9,945,000  —  9,945,000 
Exercised —  —  —  — 
Expired (3) (101,267) —  (101,270)
Forfeited —  (269,712) —  (269,712)
Ending balance as of March 31, 2022 70  28,456,250  28,456,321 
The fair value of each employee option grant is estimated on the date of the grant using the Black-Scholes option-pricing model. Key weighted-average assumptions used to apply this pricing model during three months ended March 31, 2022 were as follows:
For the Three Months Ended March 31, 2022
Risk-free interest rate
1.50%
Expected life of option grants 5 years
Expected volatility of underlying stock
37.24%
Dividends assumption --
The expected stock price volatility for the Company’s stock options was determined by the historical volatilities for industry peers and used an average of those volatilities. The Company attributes the value of stock-based compensation to operations on the straight-line single option method. Risk free interest rates were obtained from U.S. Treasury rates for the applicable periods. The dividends assumptions was $0 as the Company historically has not declared any dividends and does not expect to.
Restricted Stock Awards
On February 19, 2021, the Company granted 5,250,000 restricted stock awards to employees of the Company. These stock awards vest either 25% on the grant date and 25% on each one year anniversary of the grant date or 50% on the grant date and 50% on the one year anniversary. In accordance with the terms of the restricted stock award agreements 921,838 shares of common stock underlying the awards were withheld by the Company in satisfaction of the employee portion of the payroll taxes required to paid in connection with the grant of such awards.
On April 23, 2021, the Company granted 344,826 restricted stock awards to employees of the Company. These stock awards either vest 50% at the 6 months anniversary and 50% on the one year anniversary or over 2 years pro rata every 6 months.
On August 21, 2021, 337,500 of unvested restricted stock award grants were forfeited in connection with the departure of an employee.
On February 19, 2022, 960,106 restricted stock grants were forfeited for employee taxes.
During the three months ended March 31, 2022 and 2021 the Company recorded a charge of $0.7 million and $4.6 million, respectively, for the amortization of vested restricted stock awards.
The following table summarizes restricted stock based award activity granted:
Restricted Stock Grants
Beginning balance as of January 1, 2022 4,182,692 
Granted — 
Exercised — 
Expired — 
Forfeited (960,106)
Ending balance as of March 31, 2022 3,222,586 
The Company determined the fair value of these grants based on the closing price of the Company’s common stock on the respective grant dates. The compensation expense is being amortized over the respective vesting periods.