Quarterly report pursuant to Section 13 or 15(d)

9. Stock Compensation

9. Stock Compensation
3 Months Ended
Jun. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock Compensation



The following tables summarize share-based compensation expenses relating to Restricted Stock Units (“RSUs”) and options granted and the effect on basic and diluted loss per common share during the three month periods ended June 30, 2018 and 2017:


    Three Months
June 30,
    Three Months
June 30,
Vesting of stock options and restricted stock units   $ 263,162     $ 280,911  
Total stock-based compensation expense   $ 263,162     $ 280,911  
Weighted average number of common shares outstanding – basic and diluted     17,754,728       8,805,522  
Basic and diluted loss per common share attributable to stock-based compensation expense   $ (0.01 )   $ (0.03 )


All of the stock-based compensation expense recorded during the three months ended June 30, 2018 and 2017, which totaled $263,162 and $280,911, respectively, is included in payroll and related expense in the accompanying condensed consolidated statements of operations.


We review share-based compensation on a quarterly basis for changes to the estimate of expected award forfeitures based on actual forfeiture experience. The cumulative effect of adjusting the forfeiture rate for all expense amortization is recognized in the period the forfeiture estimate is changed. The effect of forfeiture adjustments for the three months ended June 30, 2018 was insignificant.


Restricted Stock Unit Grants to Directors and Executive Officers


On August 9, 2016, our Board of Directors (the “Board”) granted RSUs to certain of our officers and directors. The RSUs represent the right to be issued on a future date shares of our common stock for vested RSUs. Our Compensation Committee recommended the grants based on a compensation assessment provided by a third-party compensation consulting firm engaged by us that developed a peer group of companies for market assessment and analyzed compensation at such companies.


The RSUs were granted under our Amended 2010 Stock Incentive Plan and we recorded expense of $260,699 in the three months ended June 30, 2018 related to the RSU grants.


On June 14, 2018, our Board approved the issuances of additional RSUs of $35,000 in value to each of our independent directors per the 2012 Non-Employee Directors Compensation Program (the “2012 Program”) as the stock-based compensation element of their overall directors’ compensation for the fiscal year ending March 31, 2019. The Board also approved the issuance of $50,000 of RSUs to, a prospective director, if he chose to join our Board again per the 2012 Program. Finally, the Board approved the issuance of $30,000 of RSU’s to our Chief Financial Officer. The Board approval called for all of those RSUs to be priced based on the five day trailing averages of our closing stock price leading up to the acceptance of the Board seat by the prospective director, which occurred on June 19, 2018. That average price was $1.31 per share for the RSU calculations. Therefore, a total of 107,196 RSUs were issued to our existing independent directors, 38,285 RSUs were issued to Mr. Cipriani and 22,971 RSUs were issued to our Chief Financial Officer. All of those RSUs will vest ratably on September 30, 2018, December 31, 2018 and March 31, 2019.


RSUs outstanding that have vested and are expected to vest as of June 30, 2018 are as follows:


    Number of RSUs  
Vested     46,125  
Expected to vest     445,202  
Total     491,327  


During the three months ended June 30, 2018, 46,125 RSUs held by our executives were exchanged into the same number of shares of our common stock. As our executives elected to net settle a portion of their RSU’s in exchange for the Company paying the related withholding taxes on the share issuance, 24,430 of the RSUs were cancelled and we issued a net 21,695 shares to our executives.


Stock Option Activity


There were no stock option grants during the three months ended June 30, 2018. During the three months ended June 30, 2017, we issued options to four of our employees to purchase 34,500 shares of common stock at a price of $1.68 per share, the closing price on the date of the approval of the option grants by our compensation committee.


Options outstanding that have vested and are expected to vest as of June 30, 2018 are as follows:


    Number of
Term in
Vested     356,047     $ 8.83       4.09  
Expected to vest     18,000     $ 1.68       8.96  
Total     374,047                  


The following outlines the significant weighted average assumptions used to estimate the fair value information presented, with respect to stock option grants utilizing the Binomial Lattice option pricing models at, and during the three months ended June 30, 2017:


Risk free interest rate 2.21%
Average expected life 10 years
Expected volatility 92.14%
Expected dividends  None


The expected volatility was based on the historic volatility. The expected life of options granted was based on the "simplified method" as described in the SEC's guidance due to changes in the vesting terms and contractual life of current option grants compared to our historical grants.


A summary of stock option activity during the three months ended June 30, 2018 is presented below:


    Amount     Range of
Exercise Price
Stock options outstanding at March 31, 2018     409,047       $1.68-$20.50     $ 9.51  
Exercised               $  
Granted               $  
Cancelled/Expired     35,000       $20.50     $ 20.50  
Stock options outstanding at June 30, 2018     374,047       $1.68-$12.50     $ 8.48  
Stock options exercisable at June 30, 2018     356,047       $1.68-$12.50     $ 8.83  


On June 30, 2018, our stock options had no intrinsic value since the closing price on that date of $1.28 per share was below the weighted average exercise price of our stock options.


At June 30, 2018, there was approximately $1,857,821 of unrecognized compensation cost related to share-based payments, which is expected to be recognized over a weighted average period of 1.76 years.