Annual report pursuant to Section 13 and 15(d)

Stock-Based Compensation

v3.20.4
Stock-Based Compensation
12 Months Ended
Dec. 31, 2020
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation Stock-Based Compensation
 
We maintain a stock-based compensation program intended to attract, retain and provide incentives for talented employees and directors and align stockholder and employee interests. During the 2020 and 2019 periods, we granted options and restricted stock units ("RSUs") from the 2010 Equity Compensation Plan (“2010 ECP”) and the 2017 Equity Compensation Plan (“2017 ECP”). The 2010 ECP expired by its terms in April 2020. Option and RSUs vesting periods are generally up to three years and/ or achieving certain financial targets.

Compensation Expense

We recorded stock-based compensation expense for all equity incentive plans of $858,683 and $789,914 for the years ended December 31, 2020 and 2019, respectively. Total compensation cost not yet recognized at December 31, 2020 was $20,122 to be recognized over a weighted-average recognition period of less than one year.
Award Information and Activity

On August 14, 2019, the Inuvo Nominating, Corporate Governance and Compensation Committee approved modifications to the outstanding RSU grants under the 2010 and 2017 ECP plans. The modifications include deeming the performance criteria for the performance based RSU grants with a measurement period based on June 30, 2019 as met and vested. In addition, any remaining RSU grants outstanding were modified to vest in three equal parts on August 19, 2019, January 1, 2020 and July 1, 2020 as long as the grantee is employed by Inuvo on the vesting date.

On August 21, 2019 our board of directors adopted, subject to stockholder approval, an amendment to our 2017 ECP to increase in the number of shares reserved for issuance upon grants made under the plan by an additional 6,800,000 shares of our common stock. The stockholders approved the amendment to our 2017 ECP at the annual stockholders meeting on October 4, 2019.

On January 1, 2020, in accordance with the plan provisions, the number of shares available for issuance under the 2017 and 2010 ECP plans were increased by 150,000 and 250,000 shares, respectively.

The following table summarizes the stock grants outstanding under our 2010 ECP and 2017 ECP plans as of December 31, 2020:

  Options Outstanding RSUs Outstanding Options and RSUs Exercised Available Shares Total
2017 ECP —  972,860  1,485,473  6,791,667  9,250,000 
2010 ECP (*) 9,500  957,666  4,084,095  —  5,051,261 
Total 9,500  1,930,526  5,569,568  6,791,667  14,301,261 
(*) Expired April 2020

The fair value of restricted stock units is determined using market value of the common stock on the date of the grant.  The fair value of stock options is determined using the Black-Scholes-Merton valuation model.  The use of this valuation model involves assumptions that are judgmental and highly sensitive in the determination of compensation expense and include the expected life of the option, stock price volatility, risk-free interest rate, dividend yield, exercise price, and forfeiture rate. Forfeitures are estimated at the time of valuation and reduce expense ratably over the vesting period.  The forfeiture rate, which is estimated at a weighted average of 0% of unvested options outstanding, is adjusted periodically based on the extent to which actual forfeitures differ, or are expected to differ, from the previous estimate. At December 31, 2020, the 2010 ECP plan had 9,500 outstanding options and all were exercisable with an aggregate intrinsic value of $0, a weighted average exercise price of $0.56 and a weighted average remaining contractual term of 1.5 years.

The following table summarizes our stock option activity under the 2010 ECP plan during 2020:
  Options Weighted Average Exercise Price
Outstanding, beginning of year 18,248  $ 1.74 
Granted —  $ — 
Forfeited, expired or cancelled 8,748  $ 3.01 
Exercised —  $ — 
Outstanding, end of year 9,500  $ 0.56 
Exercisable, end of year 9,500  $ 0.56 

No options were granted during 2020 or 2019.

Expected volatility is based on the historical volatility of our common stock over the period commensurate with or longer than the expected life of the options. The expected life of the options is based on the vesting schedule of the option in relation to the overall term of the option. The risk free interest rate is based on the market yield of the U.S. Treasury Bill with a term equal to the expected term of the option awarded. We do not anticipate paying any dividends so the dividend yield in the model is zero.

The following table summarizes our restricted stock unit activity for 2020:
  Restricted Stock Unit Weighted Average Fair Value
Outstanding, beginning of year 2,568,951  $ 0.79 
Granted 587,103  $ 0.44 
Exercised 1,202,933  $ 0.31 
Forfeited 22,595  $ 0.50 
Outstanding, end of year 1,930,526  $ 0.28