Stock-Based Compensation

9 Months Ended

Sep. 30, 2021

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

4. Stock-Based Compensation

We have adopted equity incentive plans under which we may grant stock options and restricted stock awards to employees, consultants and directors. Except for certain options granted to certain Swedish employees, all employee, consultant and director stock options granted under our stock option plans have an exercise price equal to the market value of the underlying common stock on the grant date. There are no vesting provisions tied to performance conditions for any options, as vesting for all outstanding option grants was based solely on continued service as an employee, consultant or director. All of our outstanding stock options and restricted stock awards are classified as equity instruments.

Stock Options

During the year ended December 31, 2020, our stockholders approved the Neonode Inc. 2020 Stock Incentive Plan (the “2020 Plan”), which replaced our 2015 Stock Incentive Plan (the “2015 Plan”), which in turn replaced our Neonode Inc. 2006 Equity Incentive Plan (the “2006 Plan”). Although no new awards may be made under the 2015 or 2006 Plans, these plans are still operative for awards previously granted under those plans. Under the 2020 Plan, 750,000 shares of common stock have been reserved for awards, including nonqualified stock option grants and restricted stock grants to officers, employees, non-employee directors and consultants. The terms of the awards granted under the 2020 Plan are set by our compensation committee at its discretion.

In 2020 we established the 2020 LTIP to provide eligible persons with the opportunity to acquire an equity interest, or otherwise increase their equity interest, in the Company as an incentive for them to remain in the service of the Company. Under the 2020 LTIP, eligible employees of Neonode may waive between 50% to 67% of any future unearned bonuses that may be awarded to them under the Company’s annual bonus arrangement in exchange for the grant of shares of the Company’s common stock under the Company’s 2020 Plan.

On December 29, 2020, we issued 37,288 shares of common stock to key employees pursuant to the 2020 LTIP. The shares were immediately vested but subject to a two-year lock-up period after issuance. In the event the participant’s employment with the Company is terminated by the participant during the two-year lock-up period, the Company will repurchase the shares at a price equal to 30% of the lower of market value at issuance and the termination date. The shares issued on December 29, 2020 represent two-thirds of the total shares available for issuance to these employees under the 2020 LTIP and the last one-third is planned to be issued at the end of December 2021.

On August 12, 2021, we issued 12,830 shares of common stock to a key employee pursuant to the 2020 LTIP. The shares were immediately vested but subject to a two-year lock-up period after issuance. In the event the participant’s employment with the Company is terminated by the participant during the two-year lock-up period, the Company will repurchase the shares at a price equal to 30% of the lower of market value at issuance and the termination date. The shares issued on August 12, 2021 represent two-thirds of the total shares available for issuance under the 2020 LTIP to this employee and the last one-third is planned to be issued at the end of December 2021.

The Company has reported and paid Swedish social charges of $75,000 for the issued shares but only 30% of the stock-based compensation (totaling $77,000) was included in the consolidated statements of operations for the year ended December 31, 2020, with the remainder to be recognized ratably over the two-year lock-up period.

The Company has reported and paid Swedish social charges of $21,000 for the issued shares but only 30% and two twenty-fourth of 70% of the stock-based compensation (totaling $25,000) was included in the consolidated statements of operations for the three and nine months ended September 30, 2021, with the remainder to be recognized ratably over the remainder of the two-year lock-up period.

For the three and nine months ended September 30, 2021, $46,000 and $91,000, respectively, of stock-based compensation was included in our condensed consolidated statements of operations. Unrecognized compensation expense related to the 2020 LTIP as of September 30, 2021 was $156,000, which will be recognized over two years from issuance of the shares of common stock.

A summary of the combined activity under all of our stock option plans is set forth below:

	Number of Options Outstanding			Weighted Average Exercise Price
Outstanding at January 1, 2021		10,500		$	29.61
Expired		(1,000	)		61.10
Outstanding at September 30, 2021		9,500		$	26.19

The aggregate intrinsic value of the 9,500 stock options that are outstanding, vested and expected to vest as of September 30, 2021 was $0.

For the three and nine months ended September 30, 2021 and 2020, we recorded no compensation expense related to the vesting of stock options.

During the three and nine months ended September 30, 2021, we did not grant any options to purchase shares of our common stock to employees or members of our board of directors.

Stock options granted under the 2006, 2015 and 2020 Plans are exercisable over a maximum term of ten years from the date of grant, vest in various installments over a one to four-year period and have exercise prices reflecting the market value of the shares of common stock on the date of grant.