Quarterly report pursuant to Section 13 or 15(d)

Capital Stock, Stock Plans and Stock-Based Compensation

v3.21.2
Capital Stock, Stock Plans and Stock-Based Compensation
9 Months Ended
Sep. 30, 2021
Share-based Payment Arrangement [Abstract]  
Capital Stock, Stock Plans and Stock-Based Compensation

6. Capital Stock, Stock Plans and Stock-Based Compensation

 

The Company has certain stock option plans under which it may awards incentive stock options (“ISOs”) and/or non-qualified stock options (“NQSOs”) to employees, officers, outside directors, and outside consultants.

 

 

On July 20, 2021, the Company issued a NQSO to each of the Company’s seven reelected outside directors for the purchase, under the Company’s 2003 Outside Directors Stock Plan (the “2003 Plan”), of up to 10,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”). Dr. Louis Centofanti, the Company’s Executive Vice President (“EVP”) of Strategic Initiatives and also a member of the Company’s Board of Directors (the “Board”), was not eligible to receive an option under the 2003 Plan as an employee of the Company. Each NQSO granted is for a contractual term of ten years with one-fourth vesting annually over a four-year period. The exercise price of the NQSO is $5.93 per share, which was equal to the fair market value of the Company’s Common Stock the day preceding the grant date, pursuant to the 2003 Plan.

 

On May 4, 2021, the Company issued a NQSO to a new director elected by the Company’s Board, for the purchase, under the Company’s 2003 Plan, of up to 6,000 shares of the Company’s Common Stock. The option granted is for a contractual term of ten years with a vesting period of six months. The exercise price of the option is $7.50 per share, which was equal to the fair market value of the Company’s Common Stock the day preceding the grant date, pursuant to the 2003 Plan.

 

The Company granted a NQSO to Robert Ferguson on July 27, 2017 from the Company’s 2017 Stock Option Plan (“2017 Plan”) for the purchase of up to 100,000 shares of the Company’s Common Stock (“Ferguson Stock Option”) in connection with his work as a consultant to the Company’s Test Bed Initiative (“TBI”) at our Perma-Fix Northwest Richland, Inc. (“PFNWR”) facility at an exercise price of $3.65 per share, which was the fair market value of the Company’s Common Stock on the date of grant. The term of the Ferguson Stock Option is seven years from the grant date. The vesting of the Ferguson Stock Option is subject to the achievement of three separate milestones by certain dates. The 10,000 options under the first milestone were exercised by Robert Ferguson in 2018. The vesting date for the second and third milestones for the purchase of up to 30,000 and 60,000 shares of the Company’s Common Stock was previously extended to December 31, 2021 and December 31, 2022, respectively. The Company has not recognized compensation costs (fair value of approximately $262,000 at September 30, 2021) for the remaining 90,000 Ferguson Stock Option under the remaining two milestones since achievement of the performance obligation under each of the two remaining milestones is uncertain at September 30, 2021. All other terms of the Ferguson Stock Option remain unchanged.

 

The Company estimates fair value of stock options using the Black-Scholes valuation model. Assumptions used to estimate the fair value of stock options granted include the exercise price of the award, the expected term, the expected volatility of the Company’s stock over the option’s expected term, the risk-free interest rate over the option’s expected term, and the expected annual dividend yield. The fair value of the options granted as discussed above and the related assumptions used in the Black-Scholes option model used to value the options granted for the nine months ended September 30, 2021 were as follows:

 

    Outside Director Stock Option Granted  
    Nine Months Ended September 30,  
    2021  
Weighted-average fair value per share   $ 3.90  
Risk -free interest rate (1)     1.23%-1.61 %
Expected volatility of stock (2)     55.84%-55.91 %
Dividend yield     None  
Expected option life (3)     10.0 years  

 

(1) The risk-free interest rate is based on the U.S. Treasury yield in effect at the grant date over the expected term of the option.

(2) The expected volatility is based on historical volatility from our traded Common Stock over the expected term of the option.

(3) The expected option life is based on historical exercises and post-vesting data.

 

 

The following table summarizes stock-based compensation recognized for the three and nine months ended September 30, 2021 and 2020 for our employee and director stock options.

 

    2021     2020     2021     2020  
    Three Months Ended     Nine Months Ended  
Stock Options   September 30,     September 30,  
    2021     2020     2021     2020  
Employee Stock Options   $ 34,000     $ 34,000     $ 100,000     $ 99,000  
Director Stock Options     28,000       35,000       49,000       62,000  
Total   $ 62,000     $ 69,000     $ 149,000     $ 161,000  

 

At September 30, 2021, the Company has approximately $420,000 of total unrecognized compensation costs related to unvested options for employee and directors. The weighted average period over which the unrecognized compensation costs are expected to be recognized is approximately 2.9 years.

 

The summary of the Company’s total stock option plans as of September 30, 2021 and September 30, 2020, and changes during the periods then ended, are presented below. The Company’s plans consist of the 2010 Stock Option Plan, the 2017 Plan and the 2003 Plan:

 

    Shares     Weighted Average Exercise
Price
    Weighted Average Remaining Contractual Term
(years)
    Aggregate Intrinsic
Value (4)
 
Options outstanding January 1, 2021     658,400     $ 3.87                  
Granted     76,000     $ 6.05                  
Exercised     (500 )   $ 3.15             $ 2,175  
Forfeited/expired     (19,500 )   $ 6.75                  
Options outstanding end of period (1)     714,400     $ 4.02       3.6     $ 1,888,695  
Options exercisable at September 30, 2021(2)     416,400     $ 3.91       2.9     $ 1,146,320  

 

    Shares     Weighted Average Exercise
Price
    Weighted Average Remaining Contractual Term
(years)
    Aggregate Intrinsic
Value (4)
 
Options outstanding January 1, 2020     681,300     $ 3.84                  
Granted     24,000     $ 6.92                  
Exercised     (12,500 )   $ 3.47             $ 16,060  
Forfeited/expired     (34,400 )   $ 5.52                  
Options outstanding end of period (2)     658,400     $ 3.87       3.7     $ 2,096,355  
Options exercisable at September 30, 2020 (3)     340,400     $ 4.01       3.6     $ 1,036,255  

 

(1) Options with exercise prices ranging from $2.79 to $7.50
(2) Options with exercise prices ranging from $2.79 to $7.29
(3) Options with exercise prices ranging from $2.79 to $7.05
(4) The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price.

 

During the nine months ended September 30, 2021, the Company issued a total of 42,436 shares of its Common Stock under the 2003 Plan to its outside directors as compensation for serving on our Board. The Company has recorded approximately $343,000 in compensation expenses (included in selling, general and administration (“SG&A”) expenses) in connection with the issuance of shares of its Common Stock to outside directors..

 

During the nine months ended September 30, 2021, the Company issued 290 shares of its Common Stock from a cashless exercise of an option for the purchase of 500 shares of the Company’s Common Stock at $3.15 per share.

 

 

See “Note 15 – Common Stock Subscription Agreements” for a discussion on the sale of 1,000,000 shares of the Company’s Common Stock in a registered direct offering during the third quarter of 2021 and completed during the first part of October 2021.