Annual report pursuant to Section 13 and 15(d)

Stock Based Compensation

v3.19.3.a.u2
Stock Based Compensation
12 Months Ended
Dec. 31, 2019
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Stock-Based Compensation

(10)   Stock Based Compensation

 

(a)

Stock Options

In August 2016, the Company’s board of directors adopted the 2016 Equity Incentive Plan (the 2016 Plan) for employees, directors, and consultants. As of December 31, 2019, 401,000 shares are available for issuance under the 2016 Plan.

The service period for stock options granted to employees is generally one to four years.

The grant-date fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option-pricing model. The weighted average assumptions for grants during the years ended December 31, 2019, 2018, and 2017, are provided in the following table. Before 2019 the Company’s lack of option exercise history did not provide it reasonable basis for estimating the expected term. Therefore, the Company estimated the expected term using the simplified method, which calculates the expected term as the average of the time-to-vesting and the contractual life of an options. Beginning in 2019 the Company uses its historical option activity data to calculate the expected terms.

Since the Company’s shares have only been publicly traded since August 12, 2016 and its shares were rarely traded privately, expected volatility is estimated based on the average historical volatility of similar entities with publicly traded shares in addition to the average historical volatility of the Company. The risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve at the date of grant.

Commencing in 2019 each non-employee member of the board of directors will receive an annual award on the first trading day in February of each year of (1) a number of stock options having a value of $30,000 (with the award to the chairperson of the board of directors having a value of $45,000), (calculated as of the date of grant in accordance with the Black-Scholes option pricing model) and (2) the restricted stock units described below.

 

 

 

As of December 31,

 

 

 

2019

 

 

2018

 

 

2017

 

Valuation assumptions:

 

 

 

 

 

 

 

 

 

 

 

 

Expected dividend yield

 

 

0

%

 

 

0

%

 

 

0

%

Expected volatility

 

 

40.78

%

 

 

37.60

%

 

 

39.37

%

Expected term (years)

 

 

5.96

 

 

 

5.86

 

 

 

6.06

 

Risk-free interest rate

 

 

2.1

%

 

 

2.6

%

 

 

1.9

%

 

A summary of the Company’s stock option activity is as follows (shares in thousands):

 

 

Number

of shares

 

 

Weighted

average

exercise

price

 

 

Weighted

average

remaining contractual term

 

Balance at December 31, 2018

 

 

1,407

 

 

$

8.73

 

 

 

 

 

Granted

 

 

782

 

 

 

11.77

 

 

 

 

 

Exercised

 

 

(176

)

 

 

4.20

 

 

 

 

 

Expired/Forfeited

 

 

(413

)

 

 

11.45

 

 

 

 

 

Balance at December 31, 2019

 

 

1,600

 

 

 

9.98

 

 

 

7.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vested and exercisable at December 31, 2019

 

 

746

 

 

$

8.39

 

 

 

6.6

 

Vested and expected to vest at December 31, 2019

 

 

1,600

 

 

$

9.98

 

 

 

7.8

 

 

The weighted average grant-date fair values of options granted during the years ended December 31, 2019, 2018, and 2017, were $4.93, $3.97, and $6.02, respectively. For fully vested stock options the aggregate intrinsic values were $2.3 million, $2.5 million, and $3.6 million as of December 31, 2019, 2018, and 2017, respectively. For stock options expected to vest the aggregate intrinsic values were $0.3 million, $1.0 million, and $1.5 million as of December 31, 2019, 2018, and 2017, respectively. The grant date fair value of shares vested during the years ended December 31, 2019, 2018, and 2017 was $2.1 million, $2.8 million, and $0.3 million, respectively.

At December 31, 2019, 2018, and 2017, there was $2.3 million, $2.8 million, and $2.5 million, respectively, of total unrecognized compensation cost related to unvested stock options and restricted stock granted under the plans. That cost is expected to be recognized over the next three years.


 

(b)

Restricted Stock

The following table summarizes the Company’s Restricted Stock Unit activity (shares in thousands):

 

 

Restricted stock units

 

 

Weighted average grant date fair value

 

Non-vested balance at December 31, 2018

 

 

4

 

 

$

13.67

 

Grants

 

 

96

 

 

 

11.35

 

Vested

 

 

(1

)

 

 

13.67

 

Forfeitures

 

 

(18

)

 

 

11.35

 

Non-vested balance at December 31, 2019

 

 

80

 

 

 

11.43

 

Commencing in 2019, each non-employee member of the board of directors will receive, on the first trading day in February of each year, such number of restricted stock units as is determined by dividing (a) $30,000 (with the award to the chairperson of the board of directors having a value of $45,000) by (b) the 30-day trailing average share price.

During the year ended December 31, 2019, 14,000 restricted stock units with a fair value of $10.75 per share were issued to the members of the Company’s board of directors of which the shares vest on the first anniversary of the grant date, and 81,000 restricted stock units with a fair value of $11.46 per share were issued to employees of which the shares vest equally on each of the annual anniversaries over a four-year period. During the year ended December 31, 2018, 4,000 restricted stock units with a fair value of $12.62 per share were issued to a member of the Company’s board of directors of which the shares vest equally on each of the annual anniversaries over a three-year period.

As of December 31, 2019, there was $0.6 million of total unrecognized stock-based compensation expense related to non-vested restricted stock units which is expected to be recognized over a remaining weighted-average vesting period of 2.7 years.

 The Company currently uses authorized and unissued shares to satisfy share award exercises.

 

(c)

Employee Stock Purchase Plan (ESPP)

The Company maintains the Employee Stock Purchase Plan (ESPP) that provides employees an opportunity to purchase common stock through payroll deductions. The ESPP is implemented through consecutive 6-month offering periods commencing on March 1 and September 1 of each year. The first offering period under the ESPP commenced on March 1, 2019. The purchase price is set at 85% of the fair market value of the Company's common stock on either the first or last trading day of the offering period, whichever is lower, and annual contributions are limited to the lower of 20% of an employee's eligible compensation or such other limits as apply under Section 423 of the Internal Revenue Code for such plans such as the ESPP. The ESPP is intended to qualify as an employee stock purchase plan for purposes of Section 423 of the Internal Revenue Code.

Based on the 15% discount and the fair value of the option feature of the ESPP, it is considered compensatory. Compensation expense is calculated using the fair value of the employees’ purchase rights under the Black-Scholes model. The Company currently uses authorized and unissued shares to satisfy share award exercises.

The Company received proceeds of $97,000 from the issuance of 10,000 shares under the ESPP in August 2019.