Quarterly report pursuant to Section 13 or 15(d)

Stock Based Compensation

v3.20.2
Stock Based Compensation
6 Months Ended
Jun. 30, 2020
Share-based Payment Arrangement [Abstract]  
Stock Based Compensation

NOTE 10 – STOCK BASED COMPENSATION

 

Preferred stock

 

On April 14, 2020, The Company issued 2,500,000 shares of a newly created class of preferred stock, Series A Preferred Stock to the Company’s Chief Executive Officer in a private placement transaction. The fair value of the Series A Preferred shares was determined to be $465 and was recorded as stock compensation in selling, general and administrative expense during the six months ended June 30, 2020. The Company determined the fair value of the Series A Preferred shares by obtaining an independent valuation of the fair value of the Company’s Series A Preferred shares.

 

Common stock

 

During the six months ended June 30, 2020, the Company issued 451,198 shares of common stock to employees and officers of the Company. The fair value of the shares was determined to be $51 based on the closing price of the Company’s common stock on the dates shares were granted, and recorded as stock compensation in selling, general and administrative expense during the six months ended June 30, 2020.

 

During the six months ended June 30, 2020, the Company issued 1,250,117 shares of common stock to consultants and convertible note holders for services. The fair value of the shares was determined to be $187 based on the closing price of the Company’s common stock on the dates shares were granted, and recorded as stock compensation in selling, general and administrative expense during the six months ended June 30, 2020.

 

During the six months ended June 30, 2020, the Company issued 705,000 shares of common stock to convertible note holders for loan fees. The fair value of the shares was determined to be $89 based on the closing price of the Company’s common stock on the dates shares were granted, and was recorded as debt discount to be amortized over the term of the related convertible notes payable. During the six months ended June 30, 2020, amortization of $53 was recoded.

 

Restricted common stock

 

On May 20, 2019, the Company agreed to issue 8,000,000 shares of the Company’s common stock with vesting terms to a consultant for services. 1,000,000 shares vested immediately, and the balance of 7,000,000 shares will vest 625,000 shares per quarter over 2.8 years. In the event the consultants service with the Company terminates, any or all of the shares of common stock held by such recipient that have not vested as of the date of termination are forfeited to the Company in accordance with such restricted grant agreement.

 

The total fair value of the 8,000,000 shares was determined to be $4,000 based on the price per shares of a contemporaneous private placement of the Company’s common stock on the date granted. The Company accounts for the share awards using a graded vesting attribution method over the requisite service period, as if each tranche were a separate award. During the six months ended June 30, 2020, total share-based expense recognized related to vested restricted shares totaled $762. At June 30, 2020, there was $1,104 of unvested compensation related to these awards that will be amortized over a remaining vesting period of 1.7 years.

 

The following table summarizes restricted common stock activity for the six months ended June 30, 2020:

 

    Number of shares     Fair value of shares
(in thousands)
 
Non-vested shares, December 31, 2019     5,750,000     $ 1,682  
Granted     -       -  
Vested     (1,250,000 )     (426 )
Forfeited     -       -  
Non-vested shares, June 30, 2020     4,500,000     $ 1,103  

 

As of June 30, 2020, no shares have been issued and 3,500,000 vested shares are included in shares to be issued on the accompanying financial statements

 

Stock Options

 

During the year ended December 31, 2019, the Company issued options exercisable into 3,290,000 shares of common stock. The options initially had an exercise price of $0.23 per share, and this was amended in May 2020 to $0.10 per share. The Company used the Black-Scholes-Merton option pricing model to estimate the fair value of the modified option grants immediately before and immediately after the modification and determined the change in fair value related to the modification was de minimis.

 

In April 2020, the Company issued options exercisable into 300,000 shares of common stock which vested immediately. The options have an exercise price of $0.14 per share, and expire in ten years. Total fair value of these options at grant date was approximately $30, which was determined using the Black-Scholes-Merton option pricing model with the following average assumption: stock price $0.14 per share, expected term ranging from five years, volatility 236%, dividend rate of 0% and risk-free interest rate of 0.17%.

 

During the six months ended June 30, 2020, the Company recognized $182 of compensation expense relating to vested stock options. As of June 30, 2020, the amount of unvested compensation related to stock options was approximately $409 which will be recorded as an expense in future periods as the options vest.

 

The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of measurement corresponding with the expected term of the share option award; the expected term represents the weighted-average period of time that share option awards granted are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior; the expected volatility is based upon historical volatility of the Company’s common stock; and the expected dividend yield is based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future.

 

A summary of stock option activity during the three months ended June 30, 2020:

 

    Number of options     Weighted Average
Exercise Price
    Contractual
Life in Years
 
Options Outstanding as of December 31, 2019     3,230,000     $ 0.10       6.0  
Granted     300,000       0.14       10.0  
Exercised     -       -       -  
Expired     -       -       -  
Options Outstanding as of June 30, 2020     3,530,000       0.11       6.5  
Options Exercisable as of June 30, 2020     2,233,045     $ 0.10       5.5  

 

At June 30, 2020, the options outstanding had an intrinsic value of approximately $97.