Annual report pursuant to Section 13 and 15(d)

Stock-Based Compensation

v3.20.1
Stock-Based Compensation
12 Months Ended
Dec. 31, 2019
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. Currently, we grant options and restricted stock units ("RSUs") from the 2010 Equity Compensation Plan (“2010 ECP”) and the 2017 Equity Compensation Plan ("2017 ECP"). Option and restricted stock unit vesting periods are generally up to three years.

Compensation Expense

We recorded stock-based compensation expense for all equity incentive plans of $789,914 and $915,469 for the years ended December 31, 2019 and 2018, respectively. Total compensation cost not yet recognized at December 31, 2019 was $619,422 to be recognized over a weighted-average recognition period of 1 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.


The following table summarizes the stock grants outstanding under our 2005 Long-Term Incentive Plan ("2005 LTIP"), 2010 ECP and 2017 ECP plans as of December 31, 2019:
  Options Outstanding RSUs Outstanding Options and RSUs Exercised Available Shares Total
2017 ECP —    1,382,281    511,544    7,206,175    9,100,000   
2010 ECP 14,498    1,186,670    3,855,091    25,759    5,082,018   
2005 LTIP (*) 3,750    —    950,085    —    953,835   
Total 18,248    2,568,951    5,316,720    7,231,934    15,135,853   
(*) Expired June 2015

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, 2019, the 2005 LTIP and 2010 ECP plans had 18,248 outstanding options and all were exercisable with an aggregate intrinsic value of $0, a weighted average exercise price of $1.74 and a weighted average remaining contractual term of 1.5 years.

The following table summarizes our stock option activity under the 2005 LTIP and 2010 ECP plans during 2019:
  Options Weighted Average Exercise Price
Outstanding, beginning of year 264,246    $ 2.84   
Granted —    $ —   
Forfeited, expired or cancelled 245,998    $ 2.92   
Exercised —    $ —   
Outstanding, end of year 18,248    $ 1.74   
Exercisable, end of year 18,248    $ 1.74   

No options were granted during 2019 or 2018.

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 activity for 2019:
  Restricted Stock Weighted Average Fair Value
Outstanding, beginning of year 1,571,864    $ 0.79   
Granted 3,061,429    $ 0.30   
Exercised 944,052    $ 0.58   
Forfeited 1,120,290    $ 0.83   
Outstanding, end of year 2,568,951    $ 0.79