Quarterly report pursuant to Section 13 or 15(d)

Stock Based Compensation

v3.10.0.1
Stock Based Compensation
9 Months Ended
Dec. 31, 2018
Stock Based Compensation [Abstract]  
Stock Based Compensation

NOTE 13 - 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 2015 Plan, the “Plans”)) and the reservation of 1,000,000 shares of common stock for issuance under the Aerkomm 2017 Plan. 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).

  

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 vest commencing on the vesting start date and the remaining shares shall vest 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 vest commencing on the vesting start date and the remaining shares shall vest 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 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 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 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.

 

Option price is determined by the Compensation Committee. 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 of Aerkomm 2017 Plan. The Aerkomm 2017 Plan was approved by the Company’s stockholders on March 28, 2018. 

 

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 $360,821 and $612,611 for the three months ended December 31, 2018 and 2017, respectively, and $1,147,155 and $1,740,447 for the nine months ended December 31, 2018 and 2017, 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 2018 and 2017 under the Plans as follows:

 

  Assumptions      
  Expected term     3 - 5 years  
  Expected volatility     40.11% - 61.78 %
  Expected dividends     0 %
  Risk-free interest rate     0.71% - 2.99 %
  Forfeiture rate     0% - 5 %

  

Aircom 2014 Plan

 

A summary of the number of shares, weighted average exercise price and estimated fair value of options for Aircom 2014 Plan as of December 31, 2018 and March 31, 2018 was as follows:

 

      Number of Shares     Weighted Average Exercise Price Per Share     Weighted Average Fair Value Per Share  
  Options outstanding at April 1, 2017     1,088,882     $ 0.8087     $ 0.2542  
  Granted     -       -       -  
  Exercised     (3,936 )     0.0067       0.0019  
  Forfeited/Cancelled     (152,684 )     3.2749       1.0296  
  Options outstanding at March 31, 2018     932,262       0.4081       0.1282  
  Granted     -       -       -  
  Exercised     -       -       -  
  Forfeited/Cancelled     -       -       -  
  Options outstanding at December 31, 2018     932,262       0.4081       0.1282  
                           
  Options exercisable at March 31, 2018     681,587       0.2200       0.0690  
                           
  Options exercisable at December 31, 2018     846,287       0.3660       0.1150  

 

A summary of the status of nonvested shares under Aircom 2014 Plan as of December 31, 2018 and March 31, 2018 was as follows:

 

      Number of Shares    

Weighted
Average
Exercise Price

Per Share

 
  Options nonvested at April 1, 2017     568,629     $ 1.4349  
  Granted     -       -  
  Vested     (165,270 )     0.5215  
  Forfeited/Cancelled     (152,684 )     3.2749  
  Options nonvested at March 31, 2018     250,675       0.9163  
  Granted     -       -  
  Vested     (164,700 )     0.5748  
  Forfeited/Cancelled     -       -  
  Options nonvested at December 31, 2018     85,975       0.7305  

 

Aerkomm 2017 Plan

 

A summary of the number of shares, weighted average exercise price and estimated fair value of options under Aerkomm 2017 Plan as of December 31, 2018 and March 31, 2018 were as follows:

 

      Number of Shares     Weighted Average Exercise Price Per Share     Weighted Average Fair Value Per Share  
  Options outstanding at April 1, 2017     -     $ -     $ -  
  Granted     412,000       29.5771       17.7006  
  Exercised     -       -       -  
  Forfeited/Cancelled     (207,000     27.5000       16.4610  
  Options outstanding at March 31, 2018     205,000       31.6744       18.9522  
  Granted     78,000       19.7462       9.2500  
  Exercised     -       -       -  
  Forfeited/Cancelled     -       -       -  
  Options outstanding at December 31, 2018     283,000       28.3867       16.2781  
                           
  Options exercisable at March 31, 2018     40,875       28.2339       17.5839  
                           
  Options exercisable at December 31, 2018     111,589       28.7052       16.5968  

 

A summary of the status of nonvested shares under Aerkomm 2017 Plan as of December 31, 2018 and March 31, 2018 were as follows:

 

 

 

 

  Number of Shares    

Weighted
Average
Exercise Price

Per Share

 
  Options nonvested at April 1, 2017     -     $ -  
  Granted     412,000       29.5771  
  Vested     (88,875 )     27.8376  
  Forfeited/Cancelled     (159,000 )     27.5000  
  Options nonvested at March 31, 2018     164,125       32.5312  
  Granted     78,000       19.7462  
  Vested     (70,714 )     28.9777  
  Forfeited/Cancelled     -       -  
  Options nonvested at December 31, 2018     171,411       28.1794  

 

As of December 31, 2018 and March 31, 2018, there were approximately $2,174,000 and $1,756,000, respectively, of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plans. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures. The Company expects to recognize that cost over a weighted average period of 1 - 5 years.