XML 47 R14.htm IDEA: XBRL DOCUMENT

Stock Options

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

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 thereunder, 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.

On February 21, 2019, the Company's Board of Directors approved Amendment No. 1 to the 2018 Plan, subject to stockholder approval. On May 2, 2019, the Company's stockholders approved the 2018 Plan Amendment that increased (a) the total number of shares available for issuance under the 2018 Plan by 1,000,000 shares and (b) the number of shares available for issuance as "incentive stock options" within the meaning of Internal Revenue Code Section 422 by 1,000,000 shares.

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. The Company had 514,815 options available under the 2018 Plan at December 31, 2019.

On October 7, 2019, the Companny's CEO, Richard House, Jr., was awarded 350,000 stock options as an inducement to enter into his employment agreement. The vesting of the inducement award is in five equal annual increments commencing December 31, 2020. The inducement award does not count towards the options available under the 2018 Plan or Prior Plans.

Activity in stock options for the year ended December 31, 2018 and 2019 is as 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		308,000			1.80
Forfeited		(23,000	)		4.99
Outstanding at December 31, 2018		620,900		$	3.75
Granted		1,694,851			1.00
Forfeited		(203,766	)		1.71				104,868
Expired		(25,000	)		6.20
Exercised		(82,667	)		0.84				67,911
Outstanding at December 31, 2019		2,004,318		$	1.72		8.79		2,542,361
Vested and exercisable at December 31, 2019		804,651		$	2.53		7.98	$	873,997

The weighted average grant date fair value of options granted during the twelve-month period ending December 31, 2019 and 2018 was $0.61 and $0.69 per share. The Company measured the fair value of each option award on the date of grant using the Black-Scholes-Merton pricing model with the following assumptions:

	2019			2018
Exercise price		$0.83 to $1.80			$0.79 to $4.35
Expected life		6.8 years			6.0 years
Expected volatility		64	%		38	%
Dividend yield		0	%		0	%
Risk-free interest rate		1.43% to 2.55	%		2.27% to 2.99	%

The expected dividend yield is based on the Company's historical dividend yield. The expected volatility is based on the historical volatility of the Company's common stock. 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 was $595,833 and $133,428 for the year ended December 31, 2019 and December 31, 2018, respectively. Unrecognized compensation cost related to non-vested options at December 31, 2019 amounted to approximately $497,000, which is expected to be recognized over a weighted average period of 3.5 years.