Annual report pursuant to Section 13 and 15(d)

Stock-Based Compensation

v3.19.1
Stock-Based Compensation
12 Months Ended
Dec. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation

11. Stock-Based Compensation

 

The Company has two stock incentive plans, the 2013 Stock Incentive Plan (the “2013 Plan”) and the 2015 Stock Incentive Plan (the “2015 Plan”), (or collectively, “the Plans”), for the granting of stock-based incentive awards, including incentive stock options, non-qualified stock options and restricted stock, to employees, consultants and members of the Company’s Board. The 2013 Plan was adopted in 2012 and amended in 2013 and authorizes 1,000,000 shares to be issued under the 2013 Plan. The 2015 Plan, formerly known as “the 2014 Stock Incentive Plan,” was adopted in 2014 and was amended in 2015 and 2016 to authorize a total of 700,000 additional shares, resulting in a maximum of 1,700,000 shares being authorized for issue under the modified 2015 Plan. Both the 2013 Plan and the 2015 Plan have been approved by the stockholders of the Company. On June 15, 2017, at our annual meeting of stockholders (the “2017 Annual Meeting”), our stockholders approved an increase to the aggregate maximum number of shares available under the 2015 Plan by 5,000,000 shares (from 1,200,000 shares to 6,200,000 shares). On June 20, 2018, at our annual meeting of stockholders (the “2018 Annual Meeting”), our stockholders approved an increase to the aggregate maximum number of shares of common stock available under the 2015 Plan by 3,000,000 shares (from 6,200,000 shares to 9,200,000 shares). As of December 31, 2018, 256,991 shares were available for grant under the 2013 Plan and 2,075,686 shares were available for grant under the 2015 Plan. Share amounts set forth above are on a pre-stock split basis.

 

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. Option valuation models require the input of highly subjective assumptions including the expected stock price volatility. The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company determined the initial expected life based on a simplified method in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 718, giving consideration to the contractual terms, vesting schedules, and pre-vesting and post-vesting forfeitures.

  

The Company recorded $2,977,423 and $1,754,706 for 2018 and 2017, respectively, of stock-based compensation, which is included in selling, general, and administrative expense and cost of sales in the accompanying consolidated statement of operations. Total unamortized stock-based compensation expense at December 31, 2018 was $1,432,391.

 

Stock Options

 

Options granted vest over a period of two to four years, subject to the optionee’s continued employment or service, and may have an expiration date not longer than ten years following the date of grant. The Plans specify that the per share exercise price of an incentive stock option may not be less than 110% of the fair market value of the Company’s common stock on the date of grant, and the per share exercise price of a non-qualified stock option may not be less than the fair market value of the Company’s common stock on the date of grant. The Company’s general practice has been to grant options with a per share exercise price equal to the fair market value of the Company’s common stock on the date of grant.

 

A summary of the Company’s stock option activity for the years ended December 31, 2018 and 2017 is presented below:

 

Awards   Shares    

Weighted

Average

Exercise Price

   

Weighted

Average

Remaining Contractual

Term

 
Options outstanding at December 31, 2016     239,428     $ 5.20       7.44  
Granted     1,062,242               1.84          
Exercised                    
Forfeited     (35,420 )     5.18          
Options outstanding at December 31, 2017     1,266,250     $ 2.38       8.26  
Granted                    
Exercised                    
Forfeited     (132,762 )     1.25          
Options outstanding at December 31, 2018     1,133,488       1.75       8.14  
Options exercisable at December 31, 2018     934,156       2.47       7.69  

 

As of December 31, 2018, the range of exercise prices for outstanding options was $0.33 – $7.00.

 

There were no stock options exercised during 2018 or 2017. The intrinsic value is calculated as the total number of option shares multiplied by the excess of the closing price of our common stock on the last trading day over the exercise price of the options. This amount changes based on the fair market value of our common stock. Had all option holders exercised their options on December 31, 2018, the aggregate intrinsic value of the options would have been $1,545 on December 31, 2018.

 

The following table presents the assumptions used in determining the fair value of option awards for the year ended December 31, 2018:

 

    2018  
Weighted average grant date fair value per share of awards granted   $ 0.76  
Significant fair value assumptions:        
Expected term (in years)     5.75  
Volatility     52.54 %
Risk-free interest rate     0.03 %
Expected dividends      

  

Restricted Stock

 

A summary of award activity under the Plan for the years ended December 31, 2018 and 2017 is presented below:

 

    Shares     Weighted
Average Grant
Date Fair Value
 
Non-vested at December 31, 2016     54,187          
Granted     276,025       1.42  
Vested     (83,875 )        
Non-vested at December 31, 2017     246,337          
Granted     600,397       0.76  
Vested     (220,710 )        
Expired     (154,844 )        
Non-vested at December 31, 2018     471,180          

 

The weighted average grant date fair value of awards of restricted stock is based on the market price of the Company’s common stock on the date of the grant.