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Stockholders' Equity
3 Months Ended
Mar. 31, 2018
Stockholders Equity Deficit [Abstract]  
Stockholders' Equity

Note 8. Stockholders' Equity

Common Stock

 

On December 29, 2017, the Company completed the previously-announced acquisition of CPM, pursuant to the CPM Acquisition Agreement by the Company and NC 143, dated December 15, 2017, whereby the Company would purchase all the outstanding membership interests of CPM for an approximate aggregate purchase price of $36,000,000. The Company issued 50 million authorized and un-issued shares of its common stock, par value $0.01 per share in exchange for 100% of the outstanding membership interests of CPM, at an agreed-upon value of $0.20 per share of common stock based on an independent valuation specialist, a consideration value of $10,000,000.

Stock Incentive Plans

 

The Company has a stock-based compensation plan which provides for the granting of equity awards, including qualified incentive and non-qualified stock options, stock appreciation awards and restricted stock awards to employees, directors, consultants and advisors; the 2017 Equity Incentive Plan (the “2017 Plan”), which was adopted by the Company’s Board on April 5, 2017. The awards are subject to a vesting schedule as set forth in individual agreements.

On September 21, 2017, the Board approved an amendment to the 2017 Plan to increase the number of shares of common stock authorized for issuance under the 2017 Plan from 1,500,000 shares of common stock to 2,500,000 shares of common stock.  

On October 4, 2017, the Board approved an amendment to the 2017 Plan to increase the number of shares of common stock authorized for issuance under the 2017 Plan from 2,500,000 shares of common stock to 4,500,000 shares of common stock.  

On October 11, 2017, the Company filed a Form S-8 Registration Statement with the SEC to register the 4,500,000 shares of common stock authorized by the Board for issuance pursuant to the 2017 Plan.

On February 15, 2018, the Board approved an amendment to the 2017 Plan to increase the number of shares of common stock authorized for issuance under the 2017 Plan from 4,500,000 shares of common stock to 6,000,000 shares of common stock.

Stock Options

 

The Company estimates the fair value of share-based compensation utilizing the Black-Scholes option pricing model, which is dependent upon several variables such as the expected option term, expected volatility of the Company’s stock price over the expected option term, expected risk-free interest rate over the expected option term, expected dividend yield rate over the expected option term, and an estimate of expected forfeiture rates. The Company believes this valuation methodology is appropriate for estimating the fair value of stock options granted to employees and directors which are subject to ASC Topic 718 requirements. These amounts are the Company’s estimates and thus may not be reflective of actual future results, nor amounts ultimately realized by recipients of these grants. The Company recognizes compensation on a straight-line basis over the requisite service period for each award.

The Company’s management utilizes the simplified method to estimate the expected life for stock options granted to employees, as the Company does not have sufficient historical data regarding stock option exercises. The risk-free interest rate is based on the U.S. Treasury yields with terms equivalent to the expected life of the related option at the time of the grant. Dividend yield is based on historical trends. While the Company’s management believes these estimates are reasonable, the compensation expense recorded would increase if the expected life was increased, a higher expected volatility was used, or if the expected dividend yield increased.

 

For the three-months ended March 31, 2018, the Board of Directors granted 1,210,000 Non-qualified Stock Options (“NQSO”) to advisory board members. For the three-months ended March 31, 2018, the Company had amortized $59,003 relating to the vesting of these shares which is included in selling, general, administrative, and other expenses on the Company’s accompanying condensed consolidated statement of operations. The Company will recognize $1,284,097 as an expense in future periods as the shares vest. The Company did not have stock options to amortize for the three-months ended March 31, 2017. The Company recognizes compensation on a straight-line basis over the requisite service period for each award which are subject to a vesting schedule as set forth in individual agreements. Typically vesting occurs on a straight-line basis over three years as defined in individual agreements as the requisite service period. The Company did not grant stock options in 2017.

A summary of the Company’s stock option activity for the three-months ended March 31, 2018 is presented below:

 

 

 

No. of

Shares

 

 

Weighted

Average

Exercise

Price

 

 

Weighted

Average

Remaining

Contractual

Term

 

 

Aggregate

Intrinsic

Value

 

Balance outstanding at December 31, 2017

 

 

1,302,052

 

 

$

0.20

 

 

 

3.3

 

 

$

1,717,000

 

Granted

 

 

1,210,000

 

 

 

1.21

 

 

 

9.9

 

 

 

-

 

Exercised

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Forfeited

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Expired

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Balance outstanding at March 31, 2018

 

 

2,512,052

 

 

$

0.86

 

 

 

7.5

 

 

$

1,067,000

 

Exercisable at March 31, 2018

 

 

1,312,052

 

 

$

0.20

 

 

 

3.1

 

 

$

1,067,000

 

 

The weighted-average grant-date fair value of options granted during the three-months ended March 31, 2018 was $1.11.

Restricted Common Stock

On September 21, 2017, the Company’s Board granted an aggregate of 325,000 Restricted Stock Awards (“RSAs”) pursuant to the Company’s 2017 Plan, to the Board as annual compensation.  The RSAs have a fair market value of $0.78 on the date of grant and fully vest upon the one-year anniversary of the date of grant or September 21, 2018. For the three-months ended March 31, 2018, the Company amortized $16,250 relating to the vesting of these shares which is included in selling, general, administrative, and other expenses, on the accompanying condensed consolidated statement of operations. The Company will recognize $27,083 an expense in future periods as the shares vest. The Company did not have RSAs to amortize for the three-months ended March 31, 2017.

On September 21, 2017, the Company’s Board granted an aggregate of 2,000,000 RSAs pursuant to the 2017 Plan, to the Company’s independent directors as compensation. The RSAs have a fair market value of $0.78 on the date of grant and vest fully upon the earlier of a change in control of the Company or the Company’s listing on a national securities exchange. As of March 31, 2018, the Company had not amortized any amounts relating to the vesting of these shares due to the uncertainty of meeting these vesting milestones.

On December 14, 2017, the Board awarded a total of 942,500 shares of common stock of the Company, in the form of RSAs issued in accordance with the 2017 Plan of the Company, to the members of the Board of the Company as annual compensation for services rendered to the Company as Board members. Each member of the Board was granted an RSA constituting 188,500 shares of the Company’s common stock. Based in part on the analysis of the fairness opinion provided by a third-party valuation specialist, the Board determined that the common stock within each RSA had a fair market value of $0.20 on the date of grant. For the three-months ended March 31, 2018, the Company had amortized $62,833 relating to the vesting of these shares which is included in selling, general, administrative, and other expenses on the Company’s condensed consolidated statement of operations. The Company will recognize $104,722 as an expense in future periods as the shares vest. The Company did not have RSAs to amortize for the three-months ended March 31, 2017.

 

The Board voted to revise the $0.78 fair market value for each share issued pursuant to each RSA granted on September 21, 2017 for annual board compensation, to $0.20. The Board voted to amend the indicated fair market value in the September grants to $0.20 based in part on the analysis within the fairness opinion provided by the third-party valuation specialist.

The following table summarizes restricted common stock activity:

 

 

Number of

Shares

 

 

Fair Value

 

 

Weighted Average Grant Date Fair Value

 

Non-vested, December 31, 2017

 

3,267,500

 

 

$

1,813,500

 

 

$

0.56

 

Granted

 

-

 

 

 

-

 

 

 

-

 

Vested

 

-

 

 

 

-

 

 

 

-

 

Forfeited

 

-

 

 

 

-

 

 

 

-

 

Non-vested, March 31, 2018

 

3,267,500

 

 

$

1,813,500

 

 

$

0.56