Quarterly report pursuant to Section 13 or 15(d)

Capital Stock, Stock Plans and Stock Based Compensation

v3.20.1
Capital Stock, Stock Plans and Stock Based Compensation
3 Months Ended
Mar. 31, 2020
Share-based Payment Arrangement [Abstract]  
Capital Stock, Stock Plans and Stock Based Compensation

7. 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 February 4, 2020, the Company granted 6,000 NQSOs from the Company’s 2003 Outside Directors Stock Plan (“2003 Plan”) to a new director elected by the Company’s Board of Directors (“Board”) to fill a vacancy on the Board. The options granted were for a contractual term of ten years with a vesting period of six months. The exercise price of the options was $7.00 per share, which was equal to the Company’s closing stock price per share the day preceding the grant date, pursuant to the 2003 Outside Director Stock Plan.

 

On January 17, 2019 the Company granted 105,000 ISOs from the 2017 Stock Option Plan (“2017 Plan”) to certain employees, which included our named executive officers as follows: 25,000 ISOs to our Chief Executive Officer (“CEO”), Mark Duff; 15,000 ISOs to our Chief Financial Officer (“CFO”), Ben Naccarato; and 15,000 ISOs to our Executive Vice President (“EVP”) of Strategic Initiatives, Dr. Louis Centofanti. The ISOs granted were for a contractual term of six years with one-fifth vesting annually over a five year period. The exercise price of the ISO was $3.15 per share, which was equal to the fair market value of the Company’s Common Stock per share on the date of grant.

 

The Company granted a NQSO to Robert Ferguson on July 27, 2017 from the Company’s 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. On January 17, 2019, the Company’s Compensation and Stock Option Committee (“Compensation Committee”) and Board approved an amendment to the Ferguson Stock Option whereby the vesting date for the second milestone for the purchase of up to 30,000 shares of the Company’s Common Stock was extended to March 31, 2020 from January 27, 2019. On March 27, 2020, the Compensation Committee and the Board approved another amendment to the Ferguson Stock Option whereby the vesting date for the second milestone was further extended to December 31, 2021 from March 31, 2020 and the vesting date for the third milestone for the purchase of up to 60,000 shares of the Company’s Common Stock was extended to December 31, 2022 from January 27, 2021. The 10,000 options under the first milestone were exercised by Robert Ferguson in May 2018. The Company has not recognized compensation costs (fair value of approximately $280,000 at March 31, 2020) 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 March 31, 2020. 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 on February 4, 2020 and January 17, 2019 as discussed above and the related assumptions used in the Black-Scholes option model used to value the options granted were as follows:

 

    Outside Director Stock Options Granted     Employee Stock Option Granted  
    February 4, 2020     January 17, 2019  
Weighted-average fair value per option   $ 4.89     $ 1.42  
Risk -free interest rate (1)     1.61 %     2.58 %
Expected volatility of stock (2)     55.83 %     48.67 %
Dividend yield     None       None  
Expected option life (3)     10.0 years       5.0 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 months ended March 31, 2020 and 2019 for our employee and director stock options.

 

    Three Months Ended  
Stock Options   March 31,  
    2020     2019  
Employee Stock Options   $ 32,000     $ 43,000  
Director Stock Options     12,000       5,000  
Total   $ 44,000     $ 48,000  

 

At March 31, 2020, the Company has approximately $383,000 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 2.7 years.

 

The summary of the Company’s total Stock Option Plans as of March 31, 2020 and March 31, 2019, and changes during the periods then ended, are presented below. The Company’s Plans consist of the 2010 and 2017 Plans and the 2003 Plan:

 

    Shares     Weighted Average Exercise Price     Weighted Average Remaining Contractual Term (years)     Aggregate Intrinsic Value (3)  
Options outstanding January 1, 2020     681,300     $ 3.84                  
Granted     6,000       7.00                  
Exercised     (12,000 )     3.48               14,600  
Forfeited/expired     (20,000 )     3.45                  
Options outstanding end of period (1)     655,300     $ 3.88       4.0     $ 962,189  
Options exercisable at March 31, 2020(1)     306,800     $ 4.20       3.9     $ 392,614  

 

    Shares     Weighted Average Exercise Price     Weighted Average Remaining Contractual Term (years)     Aggregate Intrinsic Value (3)  
Options outstanding January 1, 2019     616,000     $ 4.23                  
Granted     105,000       3.15                  
Exercised                            
Forfeited/expired                            
Options outstanding end of period (2)     721,000     $ 4.07       4.7     $ 48,360  
Options exercisable at March 31, 2019(2)     261,333     $ 5.00       4.4     $ 10,560  

 

(1) Options with exercise prices ranging from $2.79 to $8.40

(2) Options with exercise prices ranging from $2.79 to $13.35

(3) The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option.

 

During the three months ended March 31, 2020, the Company issued a total of 5,128 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 $53,000 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 three months ended March 31, 2020, the Company issued 2,000 shares of its Common Stock to an employee resulting from the exercise of options from the Company’s 2017 Plan for total proceeds of $6,300. Additionally, the Company issued 1,643 shares of its Common Stock to a former employee who elected to exercise two separate options for the purchase of 8,000 and 2,000 shares of the Company’s Common Stock at $3.60 per share and $3.15 per share, respectively by utilizing the cashless exercise option, as permitted under the 2017 Plan. The net number of shares of the Company’s Common Stock issued to the optionee from the cashless exercise was determined using the closing price of the Company’s Common Stock of $4.20 on the date of exercise.