12. Stock Acquisition Rights, Stock Options and Warrants

The Company established the 2014 Stock Plan (the “2014 Stock Plan”) to attract, retain and reward individuals who contribute to the achievement of the Company’s goals and objectives. This 2014 Stock Plan superseded previous stock plans.

The Board has reserved 5,027,201 shares of common stock for issuance under the 2014 Stock Plan as of March 31, 2021, of which 1,639,593 shares are available for future issuance. Historically, the number of shares reserved under the 2014 Stock Plan were increased, based on Board approval, each January 1 through January 1, 2024 by an amount equal to the lesser of (i) 5% of the number of shares of common stock issued and outstanding on the immediately preceding December 31 or (ii) a lesser amount determined by the Board (the “evergreen provision”). Effective January 1, 2021, the Board elected to increase the shares authorized under the 2014 Stock Plan by 879,216 shares, which represented 5% of the of the Company’s common stock issued and outstanding as of December 31, 2020. On June 14, 2021, the Compensation Committee of the Board approved Amendment No. 1 to 2014 Stock Plan to eliminate the evergreen provision for all future years (i.e., January 1, 2022 through January 1, 2024).

Restricted Stock and Restricted Stock Units

A summary of non-vested restricted stock activity for the years ended March 31, 2021 and 2020 is as follows:



		Weighted
		Average
	Restricted	Grant Day
	Stock	Fair Value
Non-vested restricted stock outstanding at March 31, 2019	279,212	$	28.71
Granted	208,722		42.86
Vested	(133,776)		(28.96)
Forfeited	(1,964)		(22.85)
Non-vested restricted stock outstanding at March 31, 2020	352,194		37.93
Granted	316,337		46.07
Vested	(183,276)		(40.18)
Forfeited	(9,496)		(37.38)
Non-vested restricted stock outstanding at March 31, 2021	475,759	$	42.48

The Company recognizes compensation expense for restricted stock on a straight-line basis over the explicit vesting period. Vested restricted stock units are settled and issuable upon the earlier of the date the employee ceases to be an employee of the Company or a date certain in the future. Stock compensation expense related to restricted stock was approximately $9.2 million for the year ended March 31, 2021, which included $0.8 million of expense related to the Type III modification of restricted stock units held by the Company’s former Chairman of the Board upon his transition to a consultant to the Company that is probable of vesting under the modified condition of which approximately $8.4 million are included in general and administrative expenses, $0.6 million in product development and the remainder of approximately $0.2 million included in sales and support reported in the Consolidated Statements of Operations. Stock compensation expense related to restricted stock was approximately $4.3 million for the year ended March 31, 2020 of which approximately $3.9 million are included in general and administrative expenses, $0.2 million in product development expenses and the remainder of approximately $0.2 million included in sales and support expenses reported in the Consolidated Statements of Operations.

As of March 31, 2021, the Company incurred stock compensation costs to obtain its long-term 900 MHz broadband spectrum lease agreements amounting to approximately $195,000, which was capitalized and will be amortized over the contractual term of approximately 30-years.

In May 2020, the Compensation Committee granted restricted stock awards for 28,000 shares of common stock, or approximately $1.5 million, to satisfy the fiscal year 2020 bonus liability, recorded in accounts payable and accrued expenses, for key individuals.

As of March 31, 2021, there was $13.2 million of unvested compensation expense for the restricted stock, which is expected to be recognized over a weighted average period of 2.36 years.

Performance-Based Restricted Stock Units

A summary of the performance-based restricted stock unit activity for the years ended March 31, 2021 and 2020 is as follows:



		Weighted
		Average
	Performance	Grant Day
	Stock	Fair Value
Performance stock outstanding at March 31, 2019	109,138	$	23.80
Granted	150,291		46.23
Vested	—		—
Forfeited	(120,445)		(25.19)
Performance stock outstanding at March 31, 2020	138,984		46.85
Granted	75,049		58.65
Vested	(91,216)		46.85
Forfeited/cancelled	(47,768)		(46.85)
Performance stock outstanding at March 31, 2021	75,049	$	58.65

Outstanding performance stock units included in the table above are shown at target. Share payout can range from 0% to 200% CEO Performance Units based on the Cumulative Spectrum Proceeds Monetized (“CSPM”) metric and 25% to 350% CEO Performance Units based on the Total Stockholders Return (“TSR Performance Units”) metrics.

Performance-Based related to Report and Order and Long-Term Agreement(s)

On October 2, 2019, the Company awarded 11,307 performance-based restricted stock units under the 2014 Stock Plan. The performance goal was: prior to January 13, 2020, (A) issuance of a Final Order from the FCC (“Final Order”) providing for the creation and allocation of licenses for spectrum in the 900 MHz band consisting of paired blocks of contiguous spectrum, each containing at least 3 MHz of contiguous spectrum, authorized for broadband wireless communications uses and (B) the lack of objection by the Board to the terms and conditions (including, but not limited to, the rebanding, clearing and relocation procedures, license assignment and award mechanisms and technical and operational rules) set forth or referenced in the Final Order.

All 120,445 performance-based restricted stock units awarded were forfeited in January 2020 as a result of the performance conditions not being met by January 13, 2020. No compensation expense was recorded for these performance-based restricted stock units.

On February 28, 2020, the Company awarded 95,538 performance-based restricted stock units. The performance goals are:

(A) Target Goal: 50% of the shares vest upon (i) achievement by December 31, 2020 of a Final Order from the FCC providing for the creation and allocation of licenses for spectrum in the 900 MHz band consisting of paired blocks of contiguous spectrum, each containing at least 3 MHz of contiguous spectrum, authorized for broadband wireless communications uses and (ii) the lack of objection by the Board to the terms and conditions (including, but not limited to, the rebanding, clearing and relocation procedures, license assignment and award mechanisms and technical and operational rules) set forth or referenced in the Final Order; and

(B) Stretch Goal: The remaining 50% of the performance shares vest and settle upon the occurrence of all three of the following conditions: (i) the Company enters into one or more long-term agreement(s) with critical infrastructure or enterprise business(es) to enable such business(es) to utilize the Company’s spectrum for broadband connectivity; (ii) the combined total contract dollars payable to the Company over the initial term(s) of such agreement(s) equals or exceeds a certain amount as specified by the Board; and (iii) the agreement(s) is/are binding on such business(es) and is/are either not contingent on prior Board approval(s) or such approval(s) has/have been received.

Additionally, on February 28, 2020, the Company awarded 43,446 performance-based restricted stock units. The performance goal related to these units is: 100% of the shares will vest upon (i) achievement by December 31, 2020 of a Final Order providing for the creation and allocation of licenses for spectrum in the 900 MHz band consisting of paired blocks of contiguous spectrum, each containing at least 3 MHz of contiguous spectrum, authorized for broadband wireless communications uses and (ii) the lack of objection by the Board to the terms and conditions (including, but not limited to, the rebanding, clearing and relocation procedures, license assignment and award mechanisms and technical and operational rules) set forth or referenced in the Final Order.

On September 30, 2020, the Company recorded stock compensation expense included in general and administrative expenses reported in the Consolidated Statements of Operations amounting to approximately $4.3 million based on the achievement of the Target Goal described above or approximately 91,216 shares under the performance-based restricted stock units, upon the Report and Order becoming effective in August 2020. As of March 31, 2021, there was no stock compensation expense recognized for the Stretch Goal described above under the performance-based restricted stock units as the 47,768 performance-based restricted stock units expired as unvested.

CEO Performance Units

Cumulative Spectrum Proceeds Monetized

On December 31, 2020, the Compensation Committee awarded performance-based restricted units to the President and Chief Executive Officer as part of the Succession Plan, (the “CEO Performance Units”). The performance-based restricted units will vest on a determination date of June 24, 2024 (“Determination Date”) (unless sooner triggered by an earlier involuntary termination), based on Cumulative Spectrum Proceeds Monetized (“CSPM”) metric over a four-year measurement period commencing on June 24, 2020, with 15,025 units vesting if the minimum CSPM level is achieved, 30,049 units vesting if the target CSPM metric is achieved and up to 60,098 vesting if the maximum CSPM metric is achieved.

The Company recorded approximately $80,000 of stock compensation expense included in general and administrative expenses reported in the Consolidated Statements of Operations relating to the CEO Performance Units - CSPM for the year ended March 31, 2021. As of March 31, 2021, there was approximately $1.0 million of unvested compensation expense for the outstanding performance-based restricted stock units related to the December 31, 2020 CEO Performance Units, which is expected to be recognized over a weighted average period of 3.49 years.

Total Stockholder Return

On February 1, 2021, the Compensation Committee awarded performance-based restricted units to the President and Chief Executive Officer based on Total Stockholder Return metrics (“TSR Performance Units”). The performance-based restricted units will vest upon continued service and achievement of certain stock price levels calculated using a four-year compound annual growth rate and based on the average closing bid price per share of the Company’s common stock measured over a sixty-trading day period (“Stock Price Levels”). Shares will vest in a range of 25% to 350% of the 45,000 target reported units based on achieving specified Stock Price Levels. The vesting end measurement date is February 1, 2025, with earlier vesting determination dates upon a change in control of the Company, involuntary termination of the CEO or twelve months following the achievement of the maximum stock price level. If after February 1, 2023, the CEO achieves a Stock Price Level, there will be a vesting determination date the earlier of twelve months thereafter or February 1, 2025.

The following assumptions were used to calculate the fair value of performance-based restricted units with market price condition using the Monte Carlo simulation model:


		Year Ended
		March 31, 2021
Risk-free interest rate		0.29%
Dividend yield		-%
Volatility		56.09%
Simulation term		4 years
Forfeiture rate		-%

The Company recorded approximately $160,000 of stock compensation expense relating to the TSR Performance Units for the year ended March 31, 2021 included in general and administrative expenses reported in the Consolidated Statements of Operations. As of March 31, 2021, there was approximately $3.1 million of unvested compensation expense for the outstanding performance-based restricted stock units related to the February 1, 2021 TSR Performance Units, which is expected to be recognized over a weighted average period of 3.71 years.

Stock Options

A summary of Stock Option activity for the years ended March 31, 2021 and 2020 is as follows:



	Options	Weighted Average Exercise Price		Weighted Average Contractual Term	Aggregate Intrinsic Value
Options outstanding at March 31, 2019	1,923,634	$	23.64
Options granted	3,330		46.85
Options exercised	(107,623)		(21.71)
Options forfeited/expired	(11,875)		(45.42)
Options outstanding at March 31, 2020	1,807,466		23.57
Options granted	123,058		42.04
Options exercised	(229,801)		(22.75)
Options forfeited/expired	(37,500)		(45.29)
Options outstanding at March 31, 2021	1,663,223	$	24.96	4.13	$	37,136,093
Exercisable at March 31, 2021	1,439,823	$	23.36	3.55	$	34,301,856
Total vested or expected to vest at March 31, 2021	1,660,538	$	24.94	4.13	$	37,101,369

During the year ended March 31, 2020, the Company awarded a stock option to purchase 3,330 shares of common stock to a consultant. The award has a contractual life of 10 years. 50% of the option shares will vest on June 30, 2020 and the remaining 50% on December 31, 2020 subject to the terms of the award agreement.

On June 24, 2020, the Company awarded a stock option to purchase 60,558 shares of common stock to its newly appointed President and Chief Executive Officer as part of the Succession Plan. The award has a contractual life of 10 years. 25% of the option shares will vest on July 1, 2021 with the remaining shares vesting in three equal annual installments, based on the President and Chief Executive Officer’s continuous service to the Company through the applicable vesting dates.

On October 22, 2020, the Company awarded a Senior Executive Officer a stock option to purchase 62,500 shares of common stock. The award has a contractual life of 10 years. 25% of the option shares will vest on November 15, 2021 with the remaining shares vesting in three equal annual installments, based on continuous service of such officer to the Company through the applicable vesting dates.

The intrinsic value of stock options exercised was approximately $5.0 million at March 31, 2021.

Additional information regarding stock options outstanding at March 31, 2021 is as follows:



										Weighted
						Weighted				Average
						Average	Weighted			Exercise Price
Exercise					Number	Remaining	Average		Options	of Shares
Prices					Outstanding	Life in Years	Exercise Price		Exercisable	Exercisable
$	20.00	-	$	20.00	729,166	2.21	$	20.00	729,166	$	20.00
	20.01	-		46.23	851,419	5.40		26.80	688,577		26.11
	46.24	-		72.85	82,638	8.05		49.62	22,080		48.79
					1,663,223	4.13	$	24.96	1,439,823	$	23.36

The fair value of stock options granted is estimated on the date of grant using the Black-Scholes option valuation model. This stock-based compensation expense valuation model requires the Company to make assumptions and judgments regarding the variables used in the calculation. These variables include the expected term, the expected volatility of the Company’s common stock, expected risk-free interest rate, forfeiture rate and expected dividends. The Company calculates an expected term and volatility from the historical volatilities and terms of selected comparable public companies within its industry along with the Company’s short history regarding these variables. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the stock option. The Company estimates its forfeiture rate based on an analysis of its actual forfeitures and will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover and other factors. The Company has never paid any cash dividends. Any future determination to pay dividends will be at the discretion of the Board and will depend on the Company’s financial condition, results of operations, capital requirements, restrictions contained in any financing instruments and such other factors as the Board deems relevant in its sole discretion. Therefore, the Company uses an expected dividend yield of zero in the option-pricing model.

The following assumptions were used to calculate the fair value of stock options:



	Year Ended	Year Ended
	March 31, 2021	March 31, 2020
Risk-free interest rate	0.43% to 0.51%	0.93%
Dividend yield	-%	-%
Volatility	53.41% to 52.43%	49.63%
Expected term	6.07 years	5.67 years
Forfeiture rate	-% to 2%	-% to 2%

Stock compensation expense related to the amortization of the fair value of service-based stock options issued was approximately $1.3 million and $1.5 million for the years ended March 31, 2021 and 2020 which was included in general and administrative reported in the Consolidated Statements of Operations, respectively.

The weighted average fair value for the stock option awards granted for the fiscal year ended March 31, 2021 was $42.04 per share. As of March 31, 2021, there was approximately $1.8 million of unrecognized compensation cost related to non-vested stock options granted under the Company’s stock option plans which is expected to be recognized over a weighted-average period of 1.3 years.

Performance-Based Stock Options

A summary of the Performance-Based Stock Options as of March 31, 2021 and 2020 is as follows:



	Performance Options	Weighted Average Exercise Price
Performance Options outstanding at March 31, 2019	179,945	$	25.83
Performance Options granted	82,197		46.85
Performance Options exercised	—		—
Performance Options forfeited/expired	(179,945)		(25.83)
Performance Options outstanding at March 31, 2020	82,197		46.85
Performance Options granted	—		—
Performance Options exercised	—		—
Performance Options forfeited/expired	(33,780)		46.85
Performance Options outstanding at March 31, 2021	48,417	$	46.85

The vesting of the performance-based stock options outstanding at March 31, 2019 were subject to the attainment of a performance goal. The performance goal was: prior to January 13, 2020: (A) the issuance of a Final Order from the FCC providing for the creation and allocation of licenses for spectrum in the 900 MHz band consisting of paired blocks of contiguous spectrum, each containing at least 3 MHz of contiguous spectrum, authorized for broadband wireless communications uses and (B) the lack of objection by the Board to the terms and conditions (including, but not limited to, the rebanding, clearing and relocation procedures, license assignment and award mechanisms and technical and operational rules) set forth or referenced in the Final Order.

All 179,945 performance-based stock options were forfeited on January 13, 2020 as a result of the performance goal not being attained and no stock compensation expense was recorded for these awards.

On February 28, 2020, the Company awarded 67,562 performance-based stock options. The performance goals are:

Additionally, the Company awarded 14,635 performance-based stock options on February 28, 2020. The performance goal is: 100% of the shares will vest upon (i) achievement by December 31, 2020 of a Final Order from the FCC providing for the creation and allocation of licenses for spectrum in the 900 MHz band consisting of paired blocks of contiguous spectrum, each containing at least 3 MHz of contiguous spectrum, authorized for broadband wireless communications uses and (ii) the lack of objection by the Board to the terms and conditions (including, but not limited to, the rebanding, clearing and relocation procedures, license assignment and award mechanisms and technical and operational rules) set forth or referenced in the Final Order.

For the year ended March 31, 2021, the Company recognized $0.8 million included in general and administrative expenses reported in the Consolidated Statements of Operations, based on the achievement of the Target Goal under the performance-based stock options, upon the Report and Order becoming effective in August 2020. For the year ended March 31, 2020, there was no stock compensation expense recognized for the 82,197 performance-based stock options. As of March 31, 2021, there was no unvested compensation expense relating to the outstanding performance-based stock options.

Motorola Investment

On September 15, 2014, Motorola invested $10.0 million to purchase 500,000 Class B Units of the Company’s subsidiary, PDV Spectrum Holding Company, LLC (at a price equal to $20.00 per unit). The Company owns 100% of the Class A Units in this subsidiary. Motorola has the right at any time to convert its 500,000 Class B Units into 500,000 shares of the Company’s common stock. The Company also has the right to force Motorola’s conversion into shares of its common stock. Motorola is not entitled to any assets, profits or distributions from the operations of the subsidiary. In addition, Motorola’s conversion ratio from Class B Units to shares of the Company’s common stock is fixed on a one-for-one basis and is not dependent on the performance or valuation of either the Company or its subsidiary. The Class B Units have no redemption or call provisions and can only be converted into shares of the Company’s common stock. Management has determined that this investment does not meet the criteria for temporary equity or non-controlling interest due to the limited rights that Motorola has as a holder of Class B Units and accordingly has presented this investment as part of its permanent equity within Additional Paid-in Capital in the accompanying financial statements.