Long-term Incentive Plan
|9 Months Ended|
Sep. 30, 2021
|Long-term Incentive Plan|
|Long-term Incentive Plan||
Note 12 – Long-term Incentive Plan
On March 17, 2021, the Company granted options to purchase a total of 5,784,000 shares of common stock to its officers and certain other members of its management team. The options were granted under the Company’s existing 2014 Incentive Stock Plan. The options have an exercise price of $19.00, with 375,000 options vesting immediately and the remaining portion vesting upon the achievement of certain equity market capitalization milestones, and revenue and EBITDA operational milestones. For the three and nine months ended September 30, 2021, the Company recorded non-cash stock-based compensation expense of $489,825 and $4,704,578, respectively, for options that vested or are probable to vest. There was no stock-based compensation expense related to the Company’s LTIP in the comparable periods in 2020.
The fair value of option grants was calculated using a Monte Carlo simulation on the equity market capitalization tranches and the Black-Scholes-Merton option pricing method on the operational milestone tranches. As of September 30, 2021, we had $13,834,299 of total unrecognized stock-based compensation expense for the portion of options tied to equity market capitalization milestones and the portion of options tied to operational milestones that were considered probable of achievement, all of which will be recognized over a service period of 7 to 10 years. The probabilities of the milestone achievements are subject to catch-adjustments in each instance where an equity market capitalization milestone is achieved or when an operational milestone becomes probable to be achieved or is achieved. The fair market value of these option grants changed in the current period as certain assumptions were adjusted by management. If such milestones are achieved earlier in their expected service periods, the remaining unrecognized compensation expense related to that particular milestone would be accelerated and recognized in full during the period where that achievement is affirmed by the Board of Directors. As of September 30, 2021, and going forward, should all of the operational milestones which are currently not yet deemed probable of achievement become probable of achievement or are achieved, then the Company could ultimately recognize up to an additional $32.9 million in non-cash stock-based compensation expense at such time.
The unvested remaining equity market and operational milestones under the LTIP with their total related option grants and criteria achievement weightings of the options available for meeting a target are shown in the following table. Of the total 5,409,000 unvested options outstanding as of September 30, 2021, there are 2,704,500 options unvested for the achievement of Equity Market Capitalization targets, 1,893,150 unvested options for the achievement of annual Revenue targets, and 811,350 unvested options for the achievement of annual EBITDA Margins Before Non-Cash Charges targets.
The entire disclosure for compensation costs, including compensated absences accruals, compensated absences liability, deferred compensation arrangements and income statement compensation items. Deferred compensation arrangements may include a description of an arrangement with an individual employee, which is generally an employment contract between the entity and a selected officer or key employee containing a promise by the employer to pay certain amounts at designated future dates, usually including a period after retirement, upon compliance with stipulated requirements. This type of arrangement is distinguished from broader based employee benefit plans as it is usually tailored to the employee. Disclosure also typically includes the amount of related compensation expense recognized during the reporting period, the number of shares (units) issued during the period under such arrangements, and the carrying amount as of the balance sheet date of the related liability.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef