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Stock-Based Compensation

9 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

Note 8 – Stock-Based Compensation

In addition to cash compensation, the Company may compensate certain service providers, including employees, directors, consultants, and other advisors, with equity-based compensation in the form of stock options and restricted stock awards. The Company recognizes all equity-based compensation as stock-based compensation expense based on the fair value of the compensation measured at the grant date. For stock options, fair value is calculated at the date of grant using the Black-Scholes-Merton option pricing model. For restricted stock awards, fair value is the closing stock price for the Company’s common stock on the grant date. The expense is recognized over the vesting period of the grant. For the periods presented, all stock-based compensation expense was classified as a component within selling, general and administrative expense in the Company’s consolidated statements of operations.

The amount of stock-based compensation expense is as follows:

	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
Stock options	$	33,975	$	28,445	$	113,857	$	64,820
Restricted stock awards		2,697		16,773		14,613		60,419
Total	$	36,672	$	45,218	$	128,470	$	125,239

During three months ended March 31, 2018, the Company awarded stock options to purchase 25,000 shares of the Company’s common stock at an exercise price of $2.55 per share to one of our business consultants. During the three months ended September 30, 2019, the Company awarded stock options to purchase 10,000 shares of the Company’s common stock at an exercise price of $1.71 per share to the members on the Company’s Board of Directors. No other stock options were awarded during the nine months ended September 30, 2019.

The Company estimated the fair value of stock options using the Black-Scholes-Merton option pricing model with the following assumptions:

	Nine months ended September 30,
	2019		2018
Number of options awarded to purchase common shares		10,000		105,750
Risk-free interest rate		1.50%		2.6% - 2.8%
Expected volatility		100.3%		149.3 - 154.3%
Assumed dividend yield		N/A		N/A
Expected life of options from the date of grant		9.8 years		9.8 years

The estimated unrecognized compensation cost from unvested awards which will be recognized ratably over the remaining vesting phase is as follows:

Years ended December 31st:	Unvested stock options		Unvested restricted stock awards		Total unrecognized compensation expense
2019 (remaining three months)		36,909		1,061		37,970
2020		113,378		4,251		117,629
2021		70,896		706		71,602
2022		3,722		—		3,722
	$	224,905	$	6,018	$	230,923

Equity Incentive Plans

Our 2016 Equity Incentive Plan (the “Equity Incentive Plan”) provides for the issuance of stock-based awards to employees, officers, directors and consultants. The Plan permits the granting of stock awards and stock options. The vesting of stock-based awards is generally subject to the passage of time and continued employment through the vesting period.

Stock Option Activity

Stock option activity under our Equity Incentive Plan is summarized as follows:

								Weighted avg.
				Weighted avg.		Weighted avg.		remaining
	Number of			exercise price		grant date fair		contractual life		Aggregate
	awards			per share		value per share		(in years)		intrinsic value

Outstanding, December 31, 2018		434,451		$	1.49	$	1.47		6.91	$	230,039
Granted		10,000		$	1.53	$	1.71		10.00	$	—
Exercised		—		$	—	$	—		—	$	—
Expired/Forfeited		(7,325	)	$	1.83	$	1.86		—	$	—
Outstanding, September 30, 2019		437,126		$	1.46	$	1.49		6.23	$	148,775
Exercisable, September 30, 2019		256,919		$	1.21	$	1.22		4.43	$	148,775
Unvested, September 30, 2019		180,207		$	1.81	$	1.88		8.78	$	—

The aggregate intrinsic value represents the total pre-tax intrinsic value (the aggregate difference between the closing price of our common stock on September 30, 2019 and the exercise price for the in-the-money options) that would have been received by the option holders if all the in-the-money options had been exercised on September 30, 2019.

Restricted Stock Activity

Restricted stock activity under our Equity Incentive Plan is summarized as follows:

				Weighted avg.
	Number of			grant date
	options			fair value
Non-vested restricted shares, December 31, 2018		30,000		$	2.38
Granted		—		$	—
Vested		(25,000	)	$	2.35
Forfeited		—		$	—
Non-vested restricted shares, September 30, 2019		5,000		$	2.55