Note 9 - Stock-Based Compensation, Restricted Stock and Stock Options:

Equity Compensation Plan Information:

On December 16, 2020, the Company adopted its 2020 Long-Term Incentive Plan ( the “2020 Plan”). Under the 2020 Plan, there are 5,333,333 shares of the Company’s common stock available for issuance and the 2020 Plan has a term of 10 years. The available shares in the 2020 Plan will automatically increase on the first trading day in January of each calendar year during the term of this Plan, commencing with January 2021, by an amount equal to the lesser of (i) five percent (5%) of the total number of shares of common stock issued and outstanding on December 31 of the immediately preceding calendar year, (ii) 1,000,000 shares of common stock or (iii) such number of shares of common stock as may be established by the Company’s Board of Directors.

The Company grants equity-based compensation under its 2020 Plan and its 2016 Equity Incentive Plan (the “2016 Plan”). The 2020 Plan and 2016 Plan allows the Company to grant incentive and nonqualified stock options, and shares of restricted stock to its employees, directors and consultants. As of September 30, 2021, there is a total of 7,333,333 shares of the Company’s common stock available under the 2016 Plan.

Under the 2016 Plan and the 2020 Plan, upon the exercise of stock options and issuance of fully vested restricted common stock, shares of common stock may be withheld to satisfy tax withholdings. As of September 30, 2021, the Company intends to net settle certain employee options to ensure adequate authorized shares under the Incentive Plan. 

Stock-based compensation:

The Company recognized total expenses for stock-based compensation during the three and six months ended September 30, 2021 and 2020, which are included in the accompanying statements of operations, as follows (in thousands):

Restricted stock units:

A summary of the Company’s restricted stock activity during the six months ended September 30, 2021 is as follows (unaudited):

Upon the Company’s uplisting to Nasdaq in January 2021, the Company granted 1,061,905 restricted stock units with a fair value of approximately $4.7 million to the Company’s Chief Executive Officer.

During the six months ended September 30, 2021, the Company granted 800,000 restricted stock units with a fair value of approximately $4.1 million, in exchange for 800,000 restricted stock awards issued to an officer of the Company and a consultant during the fiscal year ended March 31, 2021. The fair value and vesting terms of the restricted stock units are identical to the terms of the restricted stock awards, and therefore, no incremental stock-based compensation has been recognized during the six months ended September 30, 2021.

During the six months ended September 30, 2021, the Company granted 400,000 restricted stock units with a fair value of approximately $1.3 million to its Chief Financial Officer.

During the three and six months ended September 30, 2021, the Company recognized stock-based compensation of approximately $2.0 million and $3.8 million, respectively, related to restricted stock. During the three months ended September 30, 2020, the Company recognized stock-based compensation of approximately $0.2 million and $4.5 million, respectively, related to restricted stock. As of September 30, 2021, unrecognized stock-based compensation totaled approximately $4.4 million.

Restricted stock awards:

A summary of the Company’s restricted stock activity during the six months ended September 30, 2021 is as follows (unaudited):

During the six months ended September 30, 2021, 66,666 shares of the Company’s restricted stock awards vested. During the six months ended September 30, 2021, the Company exchanged 88,888 shares of its vested restricted stock awards and 711,112 of its unvested restricted stock awards for restricted stock units. (See Restricted stock units).

Stock Options:

The Company provides stock-based compensation to employees, directors and consultants under the Plan. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. The Company historically has been a private company and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. The risk-free interest rate is determined by referencing the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

During the six months ended September 30, 2021, the Company granted 1,227,204 options to purchase shares of the Company’s common stock to members of the Company’s Board of Directors, employees and consultants. The options have a fair value of approximately $1.9 million.

The following was used in determining the fair value of stock options granted during the three and six months ended September 30, 2021 and 2020 (unaudited).

A summary of activity under the Plan for the six months ended September 30, 2021 is as follows (in thousands except share and per share amounts):

During the three and six months ended September 30, 2021, the Company recognized stock-based compensation of approximately $0.3 million and $0.9 million, respectively, related to stock options. During the three and six months ended September 30, 2020, the Company recognized stock-based compensation of approximately $0.6 million and $4.4 million, respectively, related to stock options. As of September 30, 2021, the Company had approximately $1.4 million of unrecognized compensation expense related to options granted under the Company’s equity incentive plan, which is expected to be recognized over a weighted-average period of 1.7 years.

Warrants:

A summary of the Company’s warrant activity during the six months ended September 30, 2021 is as follows (in thousands except share and per share amounts):

During the six months ended September 30, 2021, the Company issued 550,724 common stock warrants in exchange for consulting and advisory services. The warrants have a fair value of approximately $0.7 million which is recorded as stock-based compensation in the accompanying condensed statement of operations for the three and six months ended September 30, 2021.

The following was used in determining the fair value of warrants issued during the three and six months ended September 30, 2021 and 2020 (unaudited).