Stock Option Plans

9 Months Ended

Sep. 30, 2023

Stock Option Plans

Stock Option Plans

Note 6. Stock Option Plans

Liberty Stock Option Plans

In 2004, Liberty adopted the 2004 Incentive Stock Option Plan and the 2004 Non-Qualified Stock Option Plan, which were stock-based incentive compensation plans (the “Liberty Plans”). In February 2014, the Liberty Plans expired pursuant to their terms. Options under these plans had a 10-year life and vested over 5 years. Remaining options under these plans became fully vested with the signing of the Agreement of Merger with the Company in February 2018. In accordance with the terms of the Agreement of Merger between the Company and Liberty, the Liberty Plans were assumed by the Company, and the options were converted into and became an option to purchase an adjusted number of shares of the common stock of the Company at an adjusted exercise price per share. The number of shares was determined by multiplying the number of shares of Liberty common stock for which the option was exercisable by the number of shares of the Company’s common stock into which shares of Liberty common stock were convertible in the Agreement of Merger, which was 0.2857 (the “Liberty Conversion Ratio”), rounded to the next lower whole share. The exercise price was determined by dividing the exercise price per share of Liberty common stock by the Liberty Conversion Ratio, rounded up to the nearest cent. At the effective time of the merger between the Company and Liberty in 2018 (the “Liberty Merger”) there were 48,225 options outstanding at an exercise price of $1.18. These shares were converted to 13,771 options outstanding at an exercise price of $4.14.

A summary of stock option transactions with respect to such options for the nine months ending September 30, 2023 is as follows:

	September 30, 2023
				Weighted
			Weighted	Average
			Average	Remaining
			Exercise	Contractual		Intrinsic
	Shares		Price	Life		Value
Outstanding at beginning of period	4,733	$	4.14	0.23
Granted	—		—	—
Exercised	—		—	—
Forfeited	(4,733)		4.14	—
Outstanding at end of period	—	$	—	—	$	—
Options exercisable at September 30, 2023	—	$	—

Partners Stock Option Plan

In 2015, Partners adopted the 2015 Stock Option Plan (the “2015 Partners Plan”), which allowed both incentive stock options and nonqualified stock options to be granted.  The exercise price of each stock option equaled the market price of Partners' common stock on the date of grant and a stock option’s maximum term was 10 years.  Stock options granted in the years ended December 31, 2018 and 2017 vested over 3 years.  Partners’ previous stock compensation plan (the “2008 Partners Plan”) provided for the grant of share-based awards in the form of incentive stock options and nonqualified stock options to Partners’ directors, officers and employees.  In April 2015, the 2008 Partners Plan was terminated and replaced with the 2015 Partners Plan.  Stock options outstanding prior to April 2015 were granted under the 2008 Partners Plan and became subject to the provisions of the 2015 Partners Plan.  The 2008 Partners Plan also provided for stock options to be granted to seed investors as a reward for the contribution to organizational funds which were at risk if Partners’ organization had not been successful.  Under the 2008 Partners Plan, Partners granted stock options to seed investors in 2008, which were fully vested upon the date of the grant.

As a result of the acquisition of Partners in 2019 through an exchange of shares in an all stock transaction (the “Partners Share Exchange”), each stock option (the "Partners Options"), whether vested or unvested, issued and outstanding immediately prior to the effective time under the 2008 Partners Plan or the 2015 Partners Plan and together with the 2008 Partners Plan, (the "Partners Stock Plans"), immediately 100% vested, to the extent not already vested, and converted into and became stock options to purchase Company common stock.  In addition, the Company assumed each Partners Stock Plan, and assumed each Partners Option in accordance with the terms and conditions of the Partners Stock Plans pursuant to which it was issued.  As such, Partners Options to acquire 149,200 shares of Partners’ common stock at a weighted average exercise price of $10.52 per share were converted into stock options to acquire 256,294 shares of the Company’s common stock at a weighted average exercise price of $6.13 per share.  The number of shares was determined by multiplying the number of shares of Partners’ common stock for which the option was exercisable by the number of shares of the Company common stock into which shares of Partners common stock were convertible in the Partners Share Exchange, which was 1.7179 (the “Partners Conversion Ratio”), rounded to the next lower whole share. The exercise price was determined by dividing the exercise price per share of Partners common stock by the Partners Conversion Ratio, rounded up to the nearest cent.  

A summary of stock option transactions with respect to such options for the nine months ended September 30, 2023 is as follows:

	September 30, 2023
				Weighted
			Weighted	Average
			Average	Remaining
			Exercise	Contractual		Intrinsic
	Shares		Price	Life		Value
Outstanding at beginning of period	88,467	$	6.59	2.85
Granted	—		—	—
Exercised	(11,853)		5.83	—
Forfeited	(1,546)		5.83	—
Outstanding at end of period	75,068	$	6.73	2.59	$	76,793
Options exercisable at September 30, 2023	75,068	$	6.73

The intrinsic value represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock options exceeds the exercise price) that would have been received by the holders had they exercised their stock options on September 30, 2023.  

As stated in Note 1 – Nature of Business and Its Significant Accounting Policies, the Company follows ASC 718-10 which requires that stock-based compensation to employees and directors be recognized as compensation cost in the income statement based on their fair values on the measurement date, which, for the Company, is the date of the grant. All stock option expenses had been fully recognized prior to 2020. As such, there was no expense recorded related to stock options during the three or nine months ended September 30, 2023 or 2022.