Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

v3.21.2
Stock-Based Compensation
9 Months Ended
Sep. 30, 2021
Stock-Based Compensation  
Stock-Based Compensation

Note 11 – Stock-Based Compensation

A summary of stock option activity related to the Company’s standard employee incentive plan, excluding options awarded under the Long-term Incentive Plan (LTIP), for the nine months ended September 30, 2021 is as follows:

Weighted

Number of

Average

    

Options

    

Exercise Price

Outstanding at December 31, 2020

 

2,633,175

$

3.09

Granted

 

1,020,500

 

17.99

Exercised

 

(678,892)

 

3.50

Expired or Forfeited

 

(148,514)

 

7.97

Outstanding at September 30, 2021

 

2,826,269

$

8.06

The weighted average remaining contractual term for all options as of September 30, 2021 and December 31, 2020 was 8.1 years and 6.5 years, respectively.

As of September 30, 2021, there were 964,039 options that were fully-vested and exercisable at a weighted average exercise price of $5.28 per share. The weighted average remaining contractual term of the vested options is 6.5 years.

As of September 30, 2021, there were 1,862,230 unvested options exercisable at a weighted average exercise price of $9.50 per share. The weighted average remaining contractual term of the unvested options is 9.0 years.

The weighted average fair value of option grants was calculated using the Black-Scholes-Merton option pricing method. At September 30, 2021, the Company had $12,439,473 of unrecognized stock compensation expense, which will be recognized over a weighted average period of 3.4 years.

During the nine months ended September 30, 2021, the Company issued 68,047 shares of common stock to its independent board members as part of their annual retainer for services covering the period of July 2021 to June 2022 and for the onboarding of the 3 new directors. The fair market value on the date of award of the stock issued was $16.90, resulting in an aggregate fair value of approximately $1,150,000. The unamortized portion is included in Prepaid Expenses and Other Assets on our consolidated balance sheet. The fair market value of these awards is expensed over twelve (12) months for 59,170 shares and twenty-four (24) months for 8,877 shares beginning on July 1, 2021.

During the nine months ended September 30, 2021, the Company awarded 300,000 shares of restricted common stock to the new managing director of its newly established Vuzix Custom Solutions (VCS) business unit, also formerly referred to as Integrated Solutions Business Unit. These restricted shares are subject to vesting, including 50,000 shares that may be earned over 3 years based upon continued employment with the Company, and 250,000 shares that are being held in escrow, and which may be earned upon achievement of revenue and EBITDA operational milestones for VCS within specified periods of time over 5 years. Any such milestone shares will be cancelled if not earned within the appropriate milestone time period. The fair market value on the date of award of the restricted stock issued was $15.58, resulting in an aggregate fair value of approximately $4,674,000, of which, $779,000 has been recorded in Prepaid Expenses and Other Assets associated with the time vesting option, to be amortized over 36 months beginning October 1, 2021. The balance of shares held in escrow related to the performance-based milestones, representing a fair market value of $3,895,000, is not being amortized until such time as the performance milestones are considered probable to be achieved or have been achieved.

For the three months ended September 30, 2021 and 2020, the Company recorded total stock-based compensation expense, including stock awards but excluding awards under the Company’s LTIP, of $1,137,862 and $1,077,073, respectively. For the nine months ended September 30, 2021 and 2020, the Company recorded total stock-

based compensation expense, including stock awards but excluding awards under the Company’s LTIP, of $2,606,700 and $2,019,006, respectively.