8. STOCK OPTIONS

On April 26, 2018 at the Company’s annual meeting, the Company’s stockholders approved the FlexShopper, Inc. 2018 Omnibus Equity Compensation Plan (the “2018 Plan”). Upon the 2018 Plan’s approval, approximately 1,057,000 shares of Company common stock were available for issuance, consisting of 750,000 shares authorized for issuance under the 2018 Plan and an aggregate 307,000 shares then remaining available for issuance under the Company’s 2007 Omnibus Equity Compensation Plan (the “2007 Plan”) and 2015 Omnibus Equity Compensation Plan (the “2015 Plan, and together with the 2007 Plan, the “Prior Plans”). The 2018 Plan replaced the Prior Plans. No new awards will be granted under the Prior Plans; however, awards outstanding under the Prior Plans upon approval of the 2018 Plan remain subject to and will be paid under the applicable Prior Plan.

Grants under the 2018 Plan and the Prior Plans consist of incentive stock options, non-qualified stock options, stock appreciation rights, stock awards, stock unit awards, dividend equivalents and other stock-based awards. Employees, directors and consultants and other service providers are eligible to participate in the 2018 Plan and the Prior Plans. Options granted under the 2018 Plan and the Prior Plans vest over periods ranging from immediately upon grant to a three-year period and expire ten years from date of grant.

Activity in stock options for the nine months ended September 30, 2018 follows:

	Number of options			Weighted average exercise price		Weighted average contractual term (years)		Aggregate intrinsic value
Outstanding at January 1, 2018		335,900		$	5.61
Granted		129,000			3.21
Canceled/Forfeited		(19,500	)		4.57
Outstanding at September 30, 2018		445,400		$	4.96		7.23	$	-
Vested and exercisable at September 30, 2018		278,567		$	5.85		6.03	$	-
Vested and exercisable at September 30, 2018 and expected to vest thereafter		445,400		$	4.96		7.23	$	-

The weighted average grant date fair value of options granted during the nine-month period ending September 30, 2018 was $1.30 per share. The Company measured the fair value of each option award on the date of grant using the Black-Scholes-Merton (BSM) pricing model with the following assumptions:

Exercise price	$	2.95 to $ 4.35
Expected life		6 years
Expected volatility		38	%
Dividend yield		0	%
Risk-free interest rate		2.27% to 2.88	%

The expected dividend yield is based on the Company’s historical dividend yield. The expected volatility was based on the average of historical volatilities for a period comparable to the expected life of the options of certain entities considered to be similar to the Company. The expected life is based on the simplified expected term calculation permitted by the Securities and Exchange Commission (the “SEC”), which defines the expected life as the average of the contractual term of the options and the weighted-average vesting period for all option tranches. The risk-free interest rate is based on the annual yield on the grant date of a zero-coupon U.S. Treasury bond the maturity of which equals the option’s expected life.

The value of stock options is recognized as compensation expense by the straight-line method over the vesting period. Compensation expense recorded for options in the statements of operations was $28,544 and $101,025, for the three and nine months ended September 30, 2018, respectively, and $22,685 and $64,896 for the three and nine months ended September 30, 2017, respectively. Unrecognized compensation cost related to non-vested options at September 30, 2018 amounted to approximately $169,867, which is expected to be recognized over a weighted average period of 2.12 years.

On October 2, 2018, FlexShopper’s Board of Directors approved issuance of 169,000 option awards under the 2018 Plan to the Company’s employees at an exercise price of $0.79 per option that vests in three (3) equal annual installments beginning on the first anniversary of the date of grant and to have a term of three (3) years.