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Stock Options and Award Programs | 12 Months Ended
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Dec. 31, 2019
Share-based Payment Arrangement [Abstract] |
Stock Options and Award Programs | The Company’s stock incentive plan is administered by the Compensation Committee and authorizes the grant or award of incentive stock options, non-qualified stock options (NQSO), restricted stock awards (RSA), stock appreciation rights, dividend equivalent rights, performance unit awards and phantom shares. The Company issues new shares of common stock upon the exercise of stock options. Any shares associated with options forfeited are added back to the number of shares that underlie stock options to be granted under the stock incentive plan. The Company has issued restricted stock awards and non-qualified stock option awards as described below. Valuation of Stock Awards Restricted Stock. The Company records the fair value of all restricted stock awards based on the grant date fair value and amortizes stock compensation on a straight-line basis over the vesting period. Restricted stock award shares are issued when granted and included in the total number of common shares issued and outstanding. During the years ended December 31, 2019 and 2018, the Company granted 662,740 RSAs and 980,851 RSAs, respectively. Non-Qualified Stock Options. The Company estimates the fair value of nonqualified stock awards using a Black-Scholes Option Pricing model (“Black-Scholes model”). The fair value of each stock award is estimated on the date of grant using the Black-Scholes model, which requires an assumption of dividend yield, risk free interest rates, volatility, forfeiture rates and expected option life. The risk-free interest rates are based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. Expected volatilities are based on the historical volatility of our common stock over the expected option term. The expected term of options granted is based on analyses of historical employee termination rates and option exercises. There were 25,000 of non-qualified stock option awards granted to a non-employee as compensation for investor relations services during December 31, 2019. Restricted Stock Awards A summary of RSA activity as of December 31, 2019 and 2018, and changes for the years then ended are set forth below:
|  | 2019 |  |  | 2018 |
NON-VESTED AWARDS |  |  |  |  |  |
Non-vested awards outstanding, January 1, |  |  | 300,000 |  |  |  | - |
Granted (+) |  |  | 662,740 | (1) |  |  | 980,851 | (1)
Cancelled (-) |  |  | 50,000 | (2) |  |  | - |
Vested (-) |  |  | 405,240 | (3) |  |  | 680,851 | (1)
Non-vested awards outstanding, December 31, |  |  | 507,500 |  |  |  | 300,000 |
Weighted-average remaining contractual life (in years) |  |  | 7.99 |  |  |  | 2.0 |
Unamortized RSA compensation expense |  | $ | 90,759 |  |  | $ | 136,310 |
Aggregate intrinsic value of RSAs non-vested, December 31 |  | $ | 197,925 |  |  | $ | 126,000 |
Aggregate intrinsic value of RSAs vested, December 31 |  | $ | 171,867 |  |  | $ | 320,000 |
(1) During the year ended December 31, 2019, the Company granted 662,740 RSAs, of which i) 238,572 of RSAs were awarded to members of the Company’s board of directors as part of their annual board retainer fee that had a grant date fair value of $100,200 and vested during the period, and ii) 424,168 of RSAs were awarded to key employees tied to the attainment of certain financial goals as outlined by the Company’s Compensation Committee of the Board of Directors that had a grant date fair value of $254,501. During the year ended December 31, 2018, the Company granted 980,851 RSAs, of which i) 300,000 of RSAs were awarded as part of additional compensation plan to align key employees with the Company’s long term financial goals, and ii) 680,851 were awarded to members of the Company’s board of directors as part of their annual board retainer fee and vested during the period. (2) There were 50,000 RSAs that were cancelled during the year ended December 31, 2019. There were no RSAs cancelled or expired during the year ended December 31, 2018. (3) During the year ended December 31, 2019, 405,240 RSA vested. Non-Qualified Stock Option Awards Option pricing model assumptions for NQSO awards granted were valued using the following assumptions for the years then ended as set forth below:
|  | YEAR ENDED DECEMBER 31, 2019 |  |  | YEAR ENDED DECEMBER 31, 2018 |
|  | Non-Qualified Stock Option Awards |  |  | Non-Qualified Stock Option Awards |
|  | Employees |  |  | Directors |  |  | Non-Employees |  |  | Total |  |  | Employees |  |  | Directors |  |  | Non-Employees |  |  | Total |
Stock options granted |  |  | -- |  |  |  | -- |  |  |  | 25,000 |  |  |  | 25,000 |  |  |  | 100,000 |  |  |  | -- |  |  |  | 50,000 |  |  |  | 150,000 |
Expected dividend yield |  |  | -- |  |  |  | -- |  |  |  | 0% |  |  |  | 0% |  |  |  | 0% |  |  |  | -- |  |  |  | 0% |  |  |  | 0% |
Expected volatility |  |  | -- |  |  |  | -- |  |  |  | 64.5% |  |  |  | 64.5% |  |  |  | 65.2% - 66.7% |  |  |  | -- |  |  |  | 69.5% |  |  |  | 65.2%-6.95% |
Risk-free interest rate |  |  | -- |  |  |  | -- |  |  |  | 2.4% |  |  |  | 2.4% |  |  |  | 2.72% - 2.73% |  |  |  | -- |  |  |  | 1.0% |  |  |  | 1.0%-2.73% |
Forfeiture rate |  |  | -- |  |  |  | -- |  |  |  | 1.2% |  |  |  | 1.2% |  |  |  | 4.43% - 4.81% |  |  |  | -- |  |  |  | 10.3% |  |  |  | 4.43%-10.3% |
Expected life |  |  | -- |  |  |  | -- |  |  |  | 3 years |  |  |  | 3 years |  |  |  | 5 years |  |  |  | -- |  |  |  | 3 years |  |  |  | 3-5 years |
A summary of NQSO activity as of December 31, 2019 and 2018, and changes during the years then ended are set forth below:
|  | 2019 |  |  | 2018 |
|  |  |  |  | Weighted |  |  |  |  |  | Weighted |
|  |  |  |  | Average |  |  |  |  |  | Average |
|  |  |  |  | Grant Date |  |  |  |  |  | Grant Date |
NON-VESTED AWARDS |  | Shares |  |  | Fair Value |  |  | Shares |  |  | Fair Value |
Non-vested balances, January 1, |  |  | 2,067,503 |  |  | $ | 0.36 |  |  |  | 2,685,004 |  |  | $ | 0.35 |
Granted (+) |  |  | 25,000 | (1) |  | $ | 0.15 |  |  |  | 150,000 | (1) |  | $ | 0.25 |
Cancelled (-) |  |  | 80,001 | (2) |  | $ | 0.34 |  |  |  | 50,000 | (2) |  | $ | 0.32 |
Vested/Excercised (-) |  |  | 1,170,832 |  |  | $ | 0.34 |  |  |  | 717,501 | (3) |  | $ | 0.30 |
Non-vested balances, December 31, |  |  | 841,670 |  |  | $ | 0.38 |  |  |  | 2,067,503 |  |  | $ | 0.36 |
|  | 2019 |  |  | 2018 |
|  |  |  |  | Weighted |  |  |  |  |  | Weighted |
|  |  |  |  | Average |  |  |  |  |  | Average |
OUTSTANDING AND EXERCISABLE AWARDS |  | Shares |  |  | Exercise Price |  |  | Shares |  |  | Exercise Price |
Awards outstanding, January 1, |  |  | 4,013,334 |  |  | $ | 0.58 |  |  |  | 4,173,334 |  |  | $ | 0.60 |
Granted (+) |  |  | 25,000 | (1) |  | $ | 0.41 |  |  |  | 150,000 | (1) |  | $ | 0.50 |
Cancelled (-) |  |  | 530,000 | (2) |  | $ | 0.55 |  |  |  | 210,000 | (2) |  | $ | 0.83 |
Exercised (-) |  |  | - |  |  |  | - |  |  |  | 100,000 | (3) |  | $ | 0.44 |
Awards outstanding, December 31, |  |  | 3,508,334 |  |  | $ | 0.59 |  |  |  | 4,013,334 |  |  | $ | 0.58 |
Awards vested and expected to vest, |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
December 31, |  |  | 3,310,178 |  |  | $ | 0.59 |  |  |  | 3,422,491 |  |  | $ | 0.58 |
Awards outstanding and exercisable, |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
December 31, |  |  | 2,666,664 |  |  | $ | 0.58 |  |  |  | 1,945,831 |  |  | $ | 0.56 |
(1) During the year ended December 31, 2019, there were NQSO grants of 25,000 granted to a non-employee as compensation for investor relations services. During the year ended December 31, 2018, there were NQSO grants of 150,000, as further described below:
● | Employees. The Company granted 100,000 NQSOs as part of an additional compensation to align a key employee with the Company’s long term financial goals. This stock award grant was valued using a Black-Scholes model that assumed a 3-year vesting period, 5-year option term, a risk free rate of 2.7%, volatility of 66.7%, no assumed dividend yield, and a forfeiture rate estimate of 4.8%.
● | Non-Employees. The Company granted 50,000 NQSOs as payment for a portion of the annual retainer paid to its public investor relations firm. This stock award grant was valued using a Black-Scholes model that assumed a 1-year vesting period, 2-year option term, a risk free rate of 2.6%, volatility of 69.5%, no assumed dividend yield, and a forfeiture rate estimate of 10.3%.
(2) During the year ended December 31, 2019, there were 530,000 NQSOs that were cancelled, of which 80,001 were unvested, related to voluntary terminations. During the year ended December 31, 2018, there were 210,000 NQSOs that were cancelled, of which 50,000 that were cancelled due to termination of employment and the reminder expired unexercised at the end of the option term. (3) The total intrinsic value of stock options exercised during the year ended December 31, 2019 was approximately $10,000. There was no intrinsic value associated with options outstanding, exercisable and expected to vest as of December 31, 2019 as the stock price was below the lowest option exercise price. Aggregate intrinsic value represents total pretax intrinsic value (the difference between WidePoint’s closing stock price on December 31, 2019 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2019. The intrinsic value will change based on the fair market value of WidePoint’s stock. The weighted-average remaining contractual life of the non-qualified stock options outstanding, exercisable, and vested and expected to vest was 2.0 years, 1.8 years and 1.8 years, respectively, as of December 31, 2019. Stock Compensation Expense Share-based compensation recognized under ASC 718-10 (including restricted stock awards) represents both stock options based expense and stock grant expense. The Company recognized share-based compensation expense for the years then ended December 31 as set forth below:
|  | YEAR ENDED DECEMBER 31, 2019 |  |  | YEAR ENDED DECEMBER 31, 2018 |
|  | Shared-Based Compensation Expense |  |  | Shared-Based Compensation Expense |
|  | Employees |  |  | Directors |  |  | Non-Employees |  |  | Total |  |  | Employees |  |  | Directors |  |  | Non-Employees |  |  | Total |
Restricted stock compensation expense |  | $ | 281,051 |  |  | $ | 100,200 |  |  | $ | - |  |  | $ | 381,251 |  |  | $ | 67,690 |  |  | $ | 320,000 |  |  | $ | - |  |  | $ | 387,690 |
Non-qualified option stock compensation expense |  |  | 326,249 |  |  |  | - |  |  |  | 10,487 |  |  |  | 336,736 |  |  |  | 291,625 |  |  |  | - |  |  |  | 4,089 |  |  |  | 295,714 |
Total share-based compensation before taxes |  | $ | 607,300 |  |  | $ | 100,200 |  |  | $ | 10,487 |  |  | $ | 717,987 |  |  | $ | 359,315 |  |  | $ | 320,000 |  |  | $ | 4,089 |  |  | $ | 683,404 |
At December 31, 2019, the Company had approximately $613,800 of total unamortized compensation expense, net of estimated forfeitures, related to NQSOs that will be recognized over the weighted average period of 1 year.

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