Quarterly report pursuant to Section 13 or 15(d)

9. Stock Compensation

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9. Stock Compensation
9 Months Ended
Dec. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock Compensation

  

9. STOCK COMPENSATION

 

The following tables summarize share-based compensation expenses relating to RSUs and options granted and the effect on basic and diluted loss per common share during the three and nine month periods ended December 31, 2018 and 2017:

 

    Three Months
Ended
December 31,
2018
    Three Months
Ended
December 31,
2017
    Nine Months
Ended
December 31,
2018
    Nine Months
Ended
December 31,
2017
 
Vesting of stock options and restricted stock units   $ 344,854     $ 323,162     $ 944,512     $ 887,607  
Total stock-based compensation expense   $ 344,854     $ 323,162     $ 944,512     $ 887,607  
                                 
Weighted average number of common shares outstanding – basic and diluted     18,050,165       14,950,701       17,865,176       10,927,106  
                                 
Basic and diluted loss per common share attributable to stock-based compensation expense   $ (0.02 )   $ (0.02 )   $ (0.05 )   $ (0.08 )

 

All of the stock-based compensation expense recorded during the nine months ended December 31, 2018 and 2017, which totaled $944,512 and $887,607, respectively, is included in payroll and related expense in the accompanying condensed consolidated statements of operations.  Stock-based compensation expense recorded during the nine months ended December 31, 2018 and 2017 represented an impact on basic and diluted loss per common share of $(0.05) and $(0.08), respectively.

  

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 nine months ended December 31, 2018 was insignificant.

 

Restricted Stock Unit Grants to Directors and Executive Officers

 

On August 9, 2016, our 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. The Board’s 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.

 

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 pursuant to the 2012 Program, if he chose to join our Board. 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. Guy Cipriani and 22,971 RSUs were issued to our Chief Financial Officer. All of those RSUs vest ratably on September 30, 2018, December 31, 2018 and March 31, 2019.

 

The above noted RSUs were granted under our Amended 2010 Stock Incentive Plan and we recorded expense of $928,762 in the nine months ended December 31, 2018 related to the RSU grants. 

 

RSUs outstanding that have vested and are expected to vest as of December 31, 2018 are as follows:

 

    Number of RSUs  
Vested     46,125  
Expected to vest     240,650  
Total     286,775  

  

During the nine months ended December 31, 2018, 250,676 RSUs held by our executives and directors 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 us paying the related withholding taxes and our non-employee directors elected to receive a cash equivalent of the value of their shares equal to their estimated income taxes on the share issuance, 112,366 of the RSUs were cancelled and we issued a net 138,311 shares of common stock to our executives and directors.

 

Stock Option Activity

 

During the nine months ended December 31, 2018, we issued an option to our new CEO to purchase 552,625 shares of common stock at a price of $1.25 per share, the closing price on the date of the option grant.

  

Options outstanding that have vested and are expected to vest as of December 31, 2018 are as follows:

 

    Number of
Shares
    Weighted
Average
Exercise
Price
    Weighted
Average
Remaining
Contractual
Term in
Years
 
                   
Vested     356,047     $ 8.83       3.59  
Expected to vest     570,625     $ 1.26       9.95  
Total     926,672                  

 

The following outlines the significant weighted average assumptions used to estimate the fair value information presented, with respect to the stock option grant utilizing the Binomial Lattice option pricing models at, and during the nine months ended December 31, 2018:

 

Risk free interest rate 2.85%
Average expected life 10 years
Expected volatility 94.64%
Expected dividends  None

 

A summary of stock option activity during the nine months ended December 31, 2018 is presented below:

 

    Amount     Range of
Exercise Price
    Weighted
Average
Exercise
Price
 
Stock options outstanding at March 31, 2018     409,047       $1.68-$20.50     $ 9.51  
Exercised               $  
Granted     552,625     $ 1.25     $ 1.25  
Cancelled/Expired     (35,000 )   $ 20.50     $ 20.50  
Stock options outstanding at December 31, 2018     926,672       $1.25 – $12.50     $ 4.17  
Stock options exercisable at December 31, 2018     356,047       $1.68 – $12.50     $ 8.83  

 

On December 31, 2018, our stock options had no intrinsic value since the closing price on that date of $1.66 per share was below the weighted average exercise price of our outstanding stock options.

 

At December 31, 2018, there was approximately $1,740,025 of unrecognized compensation cost related to share-based payments, which is expected to be recognized over a weighted average period of 1.3 years.