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 June 30, 2021, there is a total of 7,333,333 shares of the Company’s common stock available under the 2016 Plan.

Stock-based compensation:

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

Restricted stock units:

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. As a result of this grant to the Company’s Chief Executive Officer, during the three months ended June 30, 2021, the Company recognized stock-based compensation of approximately $1.2 million, and as of June 30, 2021, unrecognized stock-based compensation totaled approximately $2.7 million.

Restricted stock awards:

A summary of the Company’s restricted stock activity during the three months ended June 30, 2021 is as follows:

The fair value of restricted stock awards is measured based on their fair value at the grant date and amortized over the vesting period, which is generally 2 to 3 years. As of June 30, 2021, the unrecognized stock-based compensation expense related to restricted stock awards was approximately $3.1 million, which is expected to be recognized over a weighted-average period of 1.4 years.

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 three months ended June 30, 2021, the Company granted 198,149 options to purchase shares of the Company’s common stock to employees of the Company. The options have a fair value of approximately $0.3 million.

On April 1, 2021, the Company granted 49,998 options to purchase shares of its common stock with a fair value of approximately $0.1 million to members of the Company’s Board of Directors.

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

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

As of June 30, 2021, the Company had approximately $0.7 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 1.1 years. 

Warrants:

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