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Stock Based Compensation
3 Months Ended
Mar. 31, 2022
Share-Based Payment Arrangement [Abstract]  
Stock Based Compensation

NOTE 18 - Stock Based Compensation

 

In March 2014, Aircom’s Board of Directors adopted the 2014 Stock Option Plan (the “Aircom 2014 Plan”). The Aircom 2014 Plan provided for the granting of incentive stock options and non-statutory stock options to employees, consultants and outside directors of Aircom. On February 13, 2017, pursuant to the Exchange Agreement, Aerkomm assumed the options of Aircom 2014 Plan and agreed to issue options for an aggregate of 1,088,882 shares to Aircom’s stock option holders.

 

One-third of stock option shares will be vested as of the first anniversary of the time the option shares are granted or the employee’s acceptance to serve the Company, and 1/36th of the shares will be vested each month thereafter. Option price is determined by the Board of Directors. The Aircom 2014 Plan became effective upon its adoption by the Board and shall continue in effect for a term of 10 years unless sooner terminated under the terms of Aircom 2014 Plan.

 

On May 5, 2017, the Board of Directors of Aerkomm adopted the Aerkomm Inc. 2017 Equity Incentive Plan (the “Aerkomm 2017 Plan” and together with the Aircom 2014 Plan, the “Plans”) and the reservation of 1,000,000 shares of common stock for issuance under the Aerkomm 2017 Plan. The Aerkomm 2017 Plan has been adopted by the Board and shall continue in effect for a term of 10 years unless sooner terminated under the terms. On June 23, 2017, the Board of Directors voted to increase the number of shares of common stock reserved for issuance under the Aerkomm 2017 Plan to 2,000,000 shares. The Aerkomm 2017 Plan provides for the granting of incentive stock options and non-statutory stock options to employees, consultants and outside directors of the Company, as determined by the Compensation Committee of the Board of Directors (or, prior to the establishment of the Compensation Committee on January 23, 2018, the Board of Directors). The Aerkomm 2017 Plan was approved by the Company’s stockholders on March 28, 2018. On October 21, 2021, the Board of Directors voted to increase the number of shares of common stock reserved for issuance under the Aerkomm 2017 Plan to 2,400,000 shares.

 

On June 23, 2017, the Board of Directors agreed to issue options for an aggregate of 291,000 shares under the Aerkomm 2017 Plan to certain officers and directors of the Company. The option agreements are classified into three types of vesting schedule, which includes, 1) 1/6 of the shares subject to the option shall be vested commencing on the vesting start date and the remaining shares shall be vested at the rate of 1/60 for the next 60 months on the same day of the month as the vesting start date; 2) 1/4 of the shares subject to the option shall be vested commencing on the vesting start date and the remaining shares shall be vested at the rate of 1/36 for the next 36 months on the same day of the month as the vesting start date; 3) 1/3 of the shares subject to the option shall be vested commencing on the first anniversary of vesting start date and the remaining shares shall vest at the rate of 50% each year for the next two years on the same day of the month as the vesting start date.

 

On July 31, 2017, the Board of Directors approved to issue options for an aggregate of 109,000 shares under the Aerkomm 2017 Plan to 11 of its employees. 1/3 of these shares subject to the option shall vest commencing on the first anniversary of vesting start date and the remaining shares shall vest at the rate of 50% each year for the next two years on the same day of the month as the vesting start date.

 

On December 29, 2017, the Board of Directors approved to issue options for an aggregate of 12,000 shares under the Aerkomm 2017 Plan to three of the Company’s independent directors, 4,000 shares each. All of these options were vested immediately upon issuance.

 

On June 19, 2018, the Compensation Committee approved to issue options for 32,000 and 30,000 shares under the Aerkomm 2017 Plan to two of the Company executives. One-fourth of the 32,000 shares subject to the option shall vest on May 1, 2019, 2020, 2021 and 2022, respectively. One-third of the 30,000 shares subject to the option shall vest on May 29, 2019, 2020 and 2021, respectively.

 

On September 16, 2018, the Compensation Committee approved to issue options for 4,000 shares under the Aerkomm 2017 Plan to one of the Company’s independent directors. These options shall be vested immediately.

 

On December 29, 2018, the Compensation Committee approved to issue options for an aggregate of 12,000 shares under the Aerkomm 2017 Plan to three of the Company’s independent directors, 4,000 shares each. All of these options were vested immediately upon issuance.

 

On July 2, 2019, the Board of Directors approved the grant of options to purchase an aggregate of 339,000 shares under the Aerkomm 2017 Plan to 22 of its directors, officers and employees. 25% of the shares vested on the grant date, 25% of the shares vested on July 17, 2019, 25% of the shares shall be vested on the first anniversary of the grant date, and 25% of the shares will vest upon the second anniversary of the grant date. 

 

On October 4, 2019, the Board of Directors approved the grant of options to purchase an aggregate of 85,400 shares under the Aerkomm 2017 Plan to three (3) of its employees. 25% of the shares are vested on the grant date, and 25% of the shares shall be vested on each of October 4, 2020, October 4, 2021 and October 4, 2022, respectively.

 

On December 29, 2019, the Board of Directors approved to issue options for an aggregate of 12,000 shares under the Aerkomm 2017 Plan to three of the Company’s independent directors, 4,000 shares each. All of these options shall be vested at the date of 1/12th each month for the next 12 months on the same day of December 2019.

 

On February 19, 2020, the Board of Directors approved to issue options for 2,000 shares under the Aerkomm 2017 Plan to one of the Company’s consultants for service provided in 2019. These options shall be vested immediately.

 

On September 17, 2020, the Board of Directors approved to issue options for 4,000 shares under the Aerkomm 2017 Plan to one of the Company’s independent directors. These options shall be vested at the date of 1/12th each month for the next 12 months on the same day of September 2020.

 

On December 11, 2020, the Board of Directors approved the grant of options to purchase an aggregate of 284,997 shares under the Aerkomm 2017 Plan to 37 of its directors, officers, employees and consultants. Shares shall be vested in full on the earlier of the filing date of the Company’s Form 10-K for the year ended December 31, 2020 or March 31, 2021.

 

On January 23, 2021, the Board of Directors approved to issue options for an aggregate of 12,000 shares under the Aerkomm 2017 Plan to three of the Company’s independent directors, 4,000 shares each. All of these options shall vest 1/12th each month for the next 12 months at the end of each month up to December 2021. On January 23, 2021, the Board of Directors approved to issue options for 2,000 shares under the Aerkomm 2017 Plan to one of the Company’s consultants for service provided in 2020. These options vested immediately.

 

On September 1, 2021, the Board of Directors approved to issue options for 18,750 shares under the Aerkomm 2017 Plan to one of the Company’s officers. These options shall be vested immediately.

 

On September 17, 2021, the Board of Directors approved to issue options for 4,000 shares under the Aerkomm 2017 Plan to one of the Company’s independent directors. These options shall be vested at the rate of 1/12th each month for the next 12 months on the same day of September 2021.

 

On October 21, 2021, the Board of Directors approved to issue options for 150,000 shares under the Aerkomm 2017 Plan to one of the Company’s officers. These options shall be vested immediately.

 

On December 1, 2021, the Board of Directors approved to issue options for 18,750 shares under the Aerkomm 2017 Plan to one of the Company’s officers. These options shall be vested immediately.

 

On December 29, 2021, the Board of Directors approved to issue options for an aggregate of 8,000 shares under the Aerkomm 2017 Plan to two of the Company’s independent directors, 4,000 shares each. All of these options shall be vested at the date of 1/12th each month for the next 12 months on the same day of December 2021.

 

On December 31, 2021, the Board of Directors approved to issue options for 2,000 shares under the Aerkomm 2017 Plan to one of the Company’s consultants for service provided in 2020. These options vested immediately.

 

On March 1, 2022, the Board of Directors approved to issue options for 18,750 shares under the Aerkomm 2017 Plan to one of the Company’s officers. These options shall be vested immediately.

 

Valuation and Expense Information

 

Measurement and recognition of compensation expense based on estimated fair values is required for all share-based payment awards made to its employees and directors including employee stock options. The Company recognized compensation expense of $246,999 and $1,680,365 for the three months periods ended March 31, 2022 and 2021, respectively, related to such employee stock options.

 

Determining Fair Value

 

Valuation and amortization method

 

The Company uses the Black-Scholes option-pricing-model to estimate the fair value of stock options granted on the date of grant or modification and amortizes the fair value of stock-based compensation at the date of grant on a straight-line basis for recognizing stock compensation expense over the vesting period of the option.

 

Expected term

 

The expected term is the period of time that granted options are expected to be outstanding. The Company uses the SEC’s simplified method for determining the option expected term based on the Company’s historical data to estimate employee termination and options exercised.

 

Expected dividends

 

The Company does not plan to pay cash dividends before the options are expired. Therefore, the expected dividend yield used in the Black-Scholes option valuation model is zero.

 

Expected volatility

 

Since the Company has no historical volatility, it used the calculated value method which substitutes the historical volatility of a public company in the same industry to estimate the expected volatility of the Company’s share price to measure the fair value of options granted under the Plans.

 

Risk-free interest rate

 

The Company based the risk-free interest rate used in the Black-Scholes option valuation model on the market yield in effect at the time of option grant provided in the Federal Reserve Board’s Statistical Releases and historical publications on the Treasury constant maturities rates for the equivalent remaining terms for the Plans.

 

Forfeitures

 

The Company is required to estimate forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company uses historical data to estimate option forfeitures and records share-based compensation expense only for those awards that are expected to vest.

 

The Company used the following assumptions to estimate the fair value of options granted in three months period ended March 31, 2022 and year ended December 31, 2021 under the Plans as follows:

 

Assumptions      
Expected term     5-10 years  
Expected volatility     45.79% - 72.81 %
Expected dividends     0 %
Risk-free interest rate     0.69% - 2.99 %
Forfeiture rate     0% - 5 %

 

Aircom 2014 Plan

 

Activities related to options for the Aircom 2014 Plan for the three months ended March 31, 2022 and the year ended December 31, 2021 are as follows:

 

   Number of Shares   Weighted Average Exercise Price Per Share   Weighted Average Fair Value Per Share 
Options outstanding at January 1, 2021   932,262   $0.4081   $0.1282 
Granted   
-
    
-
    
-
 
Exercised   
-
    
-
    
-
 
Forfeited/Cancelled   (820,391)   0.0067    0.0020 
Options outstanding at December 31, 2021   111,871    3.3521    1.0539 
Granted   
-
    
-
    
-
 
Exercised   
-
    
-
    
-
 
Forfeited/Cancelled   
-
    
-
    
-
 
Options outstanding at March 31, 2022 (unaudited)   111,871    3.3521    1.0539 

 

There are no unvested stock awards under Aircom 2014 Plan for the three months period ended March 31, 2022 and the year ended December 31, 2021.

  

Of the shares covered by options outstanding as of March 31, 2022, 111,871 are now exercisable. Information related to stock options outstanding and exercisable at March 31, 2022, is as follows:

 

    Options Outstanding (Unaudited)   Options Exercisable (Unaudited) 
Range of
Exercise
Prices
   Shares
Outstanding at
3/31/2022
   Weighted
Average
Remaining
Contractual
Life (years)
   Weighted
Average
Exercise
Price
   Shares
Exercisable at
3/31/2022
   Weighted
Average
Remaining
Contractual
Life (years)
   Weighted
Average
Exercise
Price
 
$3.3521    111,871    4.25    3.3521    111,871    4.25    3.3521 

 

As of March 31, 2022, there was no unrecognized stock-based compensation expense for the Aircom 2014 Plan. No option was exercised during the three months periods ended March 31, 2022 and 2021.

 

Aerkomm 2017 Plan

 

Activities related to options outstanding under Aerkomm 2017 Plan for the three months ended March 31, 2022 and the year ended December 31, 2021 are as follows:

 

   Number of
Shares
   Weighted
Average
Exercise
Price Per
Share
   Weighted
Average
Fair Value
Per Share
 
Options outstanding at January 1, 2021   992,397   $12.7486    9.3927 
Granted   215,500    4.3698    3.3578 
Exercised   
-
    
-
    
-
 
Forfeited/Cancelled   
-
    
-
    
-
 
Options outstanding at December 31, 2021   1,207,897    11.2537    7.5309 
Granted   18,750    12.1023    9.2639 
Exercised   
-
    
-
    
-
 
Forfeited/Cancelled   
-
    
-
    
-
 
Options outstanding at March 31, 2022 (unaudited)   1,226,647    11.2667    7.5573 

 

Activities related to unvested stock awards under Aerkomm 2017 Plan for the three months period ended March 31, 2022 and the year ended December 31, 2021 are as follows:

  

   Number of
Shares
   Weighted
Average
Fair Value
Per Share
 
Options unvested at January 1, 2021   438,291   $8.4541 
Granted   215,500    3.3578 
Vested   (613,597)   5.0867 
Forfeited/Cancelled   
-
    
-
 
Options unvested at December 31, 2021   40,194    8.9422 
Granted   18,750    9.2639 
Vested   (21,750)   8.9441 
Forfeited/Cancelled   
-
    
-
 
Options unvested at March 31, 2022 (unaudited)   37,194    9.1033 

 

Of the shares covered by options outstanding under the Aerkomm2017 Plan as of March 31, 2022, 1,189,453 are now exercisable; 37,194 shares will be exercisable for the twelve-month period ending March 31, 2023. Information related to stock options outstanding and exercisable at March 31, 2022, is as follows:

 

    Options Outstanding (Unaudited)   Options Exercisable (Unaudited) 
Range of
Exercise
Prices
   Shares
Outstanding at
3/31/2022
   Weighted
Average
Remaining
Contractual
Life (years)
   Weighted
Average
Exercise
Price
   Shares
Exercisable at
3/31/2022
   Weighted
Average
Remaining
Contractual
Life (years)
   Weighted
Average
Exercise
Price
 
$  2.72 – 4.20    518,500    8.10   $3.9013    516,656    8.10   $3.9007 
 7.00 – 10.00    312,997    8.67    8.2870    312,997    8.67    8.2870 
 11.00 – 14.20    130,150    7.96    11.5450    102,800    7.95    11.6572 
 20.50 – 27.50    141,000    5.66    24.3638    133,000    5.63    24.5962 
 30.00 – 35.00    124,000    5.25    34.4012    124,000    5.25    34.4012 
      1,226,647    7.66    11.2667    1,189,453    7.66    11.2190 

 

As of March 31, 2022, total unrecognized stock-based compensation expense related to stock options was approximately $156,000, which is expected to be recognized on a straight-line basis over a weighted average period of approximately 0.45 year. No option was exercised during the three months period ended March 31, 2022 and the year ended December 31, 2021.