Annual report pursuant to Section 13 and 15(d)

Stock Option Plans

v3.20.4
Stock Option Plans
12 Months Ended
Dec. 31, 2020
Stock Option Plans  
Stock Option Plans

Note 13 — Stock Option Plans

The Company has the following Stock Option Plans (“Plans”) that allow for the granting of both incentive stock options or ISOs, which can result in potentially favorable tax treatment to the participant, and non-statutory stock options. The Company’s 2014 Equity Incentive Plan (the “2014 Plan”) was approved by the stockholders of the Company on June 26, 2014. The Company no longer issues any options under its prior 2009 Plan. The 2014 Plan has an “evergreen provision”, under which the maximum number of shares of common stock that may be issued under the 2014 Plan was approved by the Company’s stockholders to increase the number of shares available for issuance thereunder to 20% of the outstanding shares of common stock. As of December 31, 2020, the authorized shares of common stock under the 2014 Plan, as amended, were 9,130,710.

The exercise price per share subject to an option is determined by the administrator, but in the case of an ISO must not be less than the fair market value of a share of our common stock on the date of grant and in the case of a non-statutory stock option must not be less than 100% of the fair market value of a share of our common stock on the date of grant.

Under the 2014 Plan, the Company may grant stock options, stock appreciation rights, performance awards of stock and/or cash, and stock awards of restricted stock.

Options outstanding under the Stock Options Plans are as follows:

2009

2014

    

Plan

    

Plan

    

Total

Outstanding as of December 31,  2018

 

110,771

 

1,435,750

 

1,546,521

Available for future issuance under plan

 

 

4,082,584

 

4,082,584

Total authorized by plan

 

110,771

 

5,518,334

 

5,629,105

Outstanding as of December 31,  2019

 

85,498

 

1,298,093

 

1,383,591

Available for future issuance under plan

 

 

5,329,309

 

5,329,309

Totals authorized by plan

 

85,498

 

6,627,402

 

6,712,900

Outstanding as of December 31,  2020

 

85,498

 

2,547,677

 

2,633,175

Available for future issuance under plan

 

 

6,583,033

 

6,583,033

Totals authorized by plan

 

85,498

 

9,130,710

 

9,216,208

The 2014 Plan gives the Board of Directors of the Company the ability to determine vesting periods for all stock incentives granted under the 2014 Plan and allows option terms to be up to ten years from the original grant date. Employees’ incentive stock options must vest at a minimum rate of 20% per year over a five-year period, commencing on the date of grant.

The following table summarizes stock option activity for the years ended December 31, 2020, 2019 and 2018:

Weighted

Average

Number of

Average

Remaining Life

    

Options

    

Exercise Price

    

(years)

Outstanding at December 31,  2017

 

1,510,244

$

5.04

 

7.58

Granted

 

330,500

 

5.81

 

  

Exercised

 

(97,264)

 

4.96

 

  

Expired or Forfeited

 

(196,959)

 

6.11

 

  

Outstanding at December 31,  2018

 

1,546,521

$

5.11

 

7.19

Granted

 

73,500

 

2.36

 

  

Exercised

 

 

 

  

Expired or Forfeited

 

(236,430)

 

6.21

 

  

Outstanding at December 31, 2019

 

1,383,591

$

4.77

 

6.25

Granted

 

1,481,000

 

1.66

 

  

Exercised

 

(82,083)

 

4.67

 

  

Expired or Forfeited

 

(149,333)

 

3.68

 

  

Outstanding at December 31, 2020

 

2,633,175

$

3.09

 

6.53

As of December 31, 2020, there were 1,251,241 options that were fully vested and exercisable at a weighted average exercise price of $4.17 per share. The weighted average remaining contractual term on the vested options is 4.58 years. The unvested balance of 1,381,934 options as of December 31, 2020 are exercisable at a weighted average exercise price of $2.16 per share. The weighted average remaining contractual term on the unvested options is 9.3 years.

As of December 31, 2019, there were 1,015,019 options that were fully vested and exercisable at a weighted average exercise price of $4.63 per share. The weighted average remaining contractual term on the vested options is 5.44 years. The unvested balance of 368,572 options as of December 31, 2019 were exercisable at a weighted average exercise price of $5.17 per share. The weighted average remaining contractual term on the vested options was 8.5 years.

As of December 31, 2018, there were 936,406 options that were fully vested and exercisable at a weighted average exercise price of $4.66 per share. The weighted average remaining contractual term on the vested options is 6.1 years. The unvested balance of 610,115 options as of December 31, 2018 were exercisable at a weighted average exercise price of $5.80 per share. The weighted average remaining contractual term on the vested options was 8.9 years.

The aggregate intrinsic value of the options outstanding as of December 31, 2020, 2019 and 2018 was approximately $16,444,695, nil and $912,360, respectively.

The Black-Scholes-Merton option pricing model was used to estimate the fair value of share-based awards under FASB ASC Topic 718. The Black-Scholes-Merton option pricing model incorporates various and highly subjective assumptions, including expected term and share price volatility.

The expected term of options granted was estimated to be the average of the vesting term, historical exercise and forfeiture rates, and the contractual life of the option. The share price volatility at the grant date is estimated using historical stock prices based upon the expected term of the options granted. The risk-free interest rate assumption is determined using the rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued. We have never paid cash dividends on our common stock and do not anticipate paying cash dividends on our common stock in the foreseeable future. Therefore, the assumed expected dividend yield is zero.

The following summary table shows the assumptions used to compute the fair value of stock options granted during 2020, 2019 and 2018 and their estimated value:

December 31, 

    

2020

    

2019

    

2018

 

Assumptions for Black-Scholes:

 

  

 

  

 

  

Expected term in years

 

6.2 to 6.6

 

6.2 to 6.3

 

6.4 to 6.6

Volatility

 

73.3% to 76.8

%

79.4% to 89.4

%  

108.9% to 119.4

%

Risk-free interest rate

 

0.41% to 0.55

%

1.63% to 1.68

%  

2.95% to 3.08

%

Expected annual dividends

 

None

 

None

 

None

Value of options granted:

 

  

 

  

 

  

Number of options granted

 

1,481,000

 

73,500

 

330,500

Weighted average fair value per share

 

$

1.08

 

$

1.71

 

$

5.01

Fair value of options granted

 

$

1,602,267

 

$

125,814

 

$

1,655,390

Under FASB ASC Topic 718, “Compensation – Stock Compensation”, the Company has elected to account for forfeitures as they occur. Stock-based compensation expense is recorded only for those awards expected to vest using an estimated forfeiture rate based on historical pre-vesting forfeiture data.

Unrecognized stock-based compensation expense was $2,075,196 as of December 31, 2020, relating to a total of 1,381,934 unvested stock options under the Company’s stock option plans. This stock-based compensation expense is expected to be recognized over a weighted average period of approximately 2.8 years.