Quarterly report pursuant to Section 13 or 15(d)

Share-based Compensation

v3.19.1
Share-based Compensation
3 Months Ended
Mar. 31, 2019
Stock Options and Grants [Abstract]  
Stock Options and Grants

11.

Share-based Compensation 


On October 26, 2016, the Company’s Board of Directors approved the issuance of up to 500,000 shares of the Company’s common stock in the form of restricted stock or options (“2016 Stock Plan”). Effective January 20, 2017, the 2016 Stock Plan was amended and restated as the SG Blocks, Inc. Stock Incentive Plan, as further amended effective June 1, 2018 (the “Incentive Plan”). The Incentive Plan authorizes the issuance of up to 2,500,000 shares of common stock. It authorizes the issuance of equity-based awards in the form of stock options, stock appreciation rights, restricted shares, restricted share units, other share-based awards and cash-based awards  to non-employee directors and to officers, employees and consultants of the Company and its subsidiaries, except that incentive stock options may only be granted to the Company’s employees and its subsidiary’s employees. The Incentive Plan expires on October 26, 2026, and is administered by the Compensation Committee of the Board of Directors of the Company. Each of the Company’s employees, directors, and consultants are eligible to participate in the Incentive Plan. As of March 31, 2019, there were 1,020,202 shares of common stock available for issuance under the Incentive Plan.


Stock-Based Compensation Expense 


Stock-based compensation expense is included in the consolidated statements of operations as follows:  





Three Months Ended

March 31,





2019
2018

 

Payroll and related expenses

   

$

162,493

   

   

$

79,989

   

 

       Total

   

$

162,493

   

 

$

79,989

   

 

The following table presents total stock-based compensation expense by security type included in the consolidated statements of operations:





Three Months Ended

March 31,





 2019

2018

 

Stock options

   

$

32,098

  

  

$

79,989

   

 

Restricted stock units

   

 

130,395

  

  

 

   


Total
$ 162,493

$ 79,989


Stock-Based Option Awards 


The fair value of the stock-based option awards granted during the three months ended March 31, 2019 and 2018, were estimated at the date of grant using the Black-Scholes option valuation model with the following assumptions: 

 

 

 

 

2019

 


  2018

 

Expected dividend yield

 

 

%



%

 

Expected stock volatility

 

 

68.35

%



25.70 %

 

Risk-free interest rate

 

 

2.44

%



2.56 %

 

Expected life

 

 

3.00

 



5.00

 

Because the Company does not have significant historical data on employee exercise behavior, the Company uses the “Simplified Method” to calculate the expected life of the stock-based option awards granted to employees. The simplified method is calculated by averaging the vesting period and contractual term of the options.


The following table summarizes stock-based option activities and changes during the three months ended March 31, 2019. The table includes options granted to employees and directors of the Company, as described below: 

 

 

 

 

 Shares

 

 

Weighted Average Fair Value Per Share

 

 

Weighted
Average Exercise Price Per Share

 

 

Weighted Average Remaining Terms (in years)

 

 

Aggregate Intrinsic Value

 

 

Outstanding – December 31, 2018

 

 

1,105,059

 

 

$

1.24

 

 

$

4.06

 

 

 

8.41

 

 

$

 

 

Granted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancelled

 

 

(25,000

)

 

 

 

 

 

 

 

 


 

 

 

 

 

 

Outstanding – March 31, 2019

 

 

1,080,059

 

 

 

1.24

 

 

 

4.05

 

 

 

8.15

 

 

$

 

 

Exercisable – December 31, 2018

 

 

949,355

 

 

 

1.23

 

 

 

4.00

 

 

 

8.30

 

 

 

 

 

Exercisable – March 31, 2019

 

 

970,190

 

 

$

1.23

 

 

$

4.01

 

 

 

8.07

 

 

$

 

  

For the three months ended March 31, 2019 and 2018, the Company recognized stock-based compensation expense of $32,098 and $79,989, respectively, related to stock options. This expense is included in payroll and related expenses in the accompanying consolidated statements of operations.

 

As of March 31, 2019, there was $131,815 of total unrecognized compensation costs related to non-vested stock options, which will be expensed over a weighted average period of one year. The intrinsic value is calculated as the difference between the fair value of the stock price at year end and the exercise price of each of the outstanding stock options. The fair value of the stock price at March 31, 2019 was $1.84 per share.


In March 2018, the Company granted Mr. Galvin, Mr. Shetty and six employees of the Company options to purchase 82,154, 81,342 and an aggregate of 86,504, respectively, shares of the Company’s common stock with an exercise price of $4.61 per share. These options vest in equal quarterly installments over either a two-year and three-year period and will fully vest by the end of March 31, 2021. The options with a two-year period, which includes those granted to Mr. Galvin and Mr. Shetty, will vest in full by December 31, 2019; the options with a three-year vesting period will vest in full by March 31, 2021. The fair value of these options upon issuance amounted to $320,000.


Non-Employee Stock Options 


In September 2017, in connection with an advisory agreement entered into by the Company (the “Advisory Agreement”), a consultant was granted options to purchase 50,000 shares of the Company’s common stock, with an exercise price of $6.25. The options were scheduled to vest when certain performance conditions were met. These performance conditions consisted of the purchase of fifty modular units from the Company by qualified customers. As of March 31, 2019, the required performance conditions were not met, and the options expired. 


Restricted Stock Units 


Effective July 26, 2018, a total of 27,955 of restricted stock units were granted to the Company’s non-employee directors, under the Company’s stock-based compensation plan, at the calculated fair value of $5.36 per share, which represents the average closing price of the Company’s common stock for the ten trading days immediately preceding and including the grant date. Restricted stock units granted to directors in 2018 vest on the earlier of (A) the first anniversary of the date of the grant or (B) the date of the annual meeting of the Company’s stockholders that occurs in the year immediately following the date of the grant; and are payable six months after the termination of the director from the Board or death or disability.


On March 22, 2019, a total of 314,058 of restricted stock units were granted to Mr. Galvin, Mr. Armstrong, Mr. Shetty, six employees and one consultant of the Company, under the Company's stock-based compensation plan, at the fair value of $2.70 per share, which represents the closing price of the Company's common stock on February 26, 2019. Restricted stock units granted to Mr. Galvin, Mr. Armstrong, Mr. Shetty, and an aggregate of six employees and one consultant of 122,785, 15,432, 114,575 and an aggregate of 61,266, respectively, vest in installments over either a one-year, two-year, three-year and four-year period and will fully vest by the end of December 31, 2022. The fair value of these units upon issuance amounted to $847,957 


On January 15, 2019 and February 26, 2019, a total of 10,514 of restricted stock units were granted to two of the Company’s non-employee directors, under the Incentive Plan, at the calculated fair value of $2.94 and $2.76 per share, which represents the average closing price of the Company’s common stock for the ten trading days immediately preceding and including the grant date. The restricted stock units granted on January 15, 2019 will vest on January 15, 2020, subject to each individual’s continued service as a director of the Company through such date, and are payable six months after the termination of the director from the Company’s Board of Directors or death or disability. The restricted stock units granted on February 26, 2019 vest on the earlier of (A) the first anniversary of the date of the grant or (B) the date of the 2019 annual meeting of the Company’s stockholders subject to each individual’s continued service as a director of the Company through such date, and are payable six months after the termination of the director from the Board of Directors or death or disability.

 

For the three months ended March 31, 2019 and 2018, the Company recognized stock-based compensation expense of $130,395 and $0 related to restricted stock units. This expense is included in the payroll and related expenses in the accompanying condensed consolidated statement of operations. For the three months ended March 31, 2019 and 2018, the Company recognized $54,315 and $0 related to restricted stock units in lieu of accrued compensation. 


The following table summarizes restricted stock unit activities during the three months ended March 31, 2019:




    Number of Shares

 

Non-vested balance at January 1, 2019



22,364

 

Granted



324,572

Vested

Forfeited/Expired

Non-vested balance at March 31, 2019 
346,936