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Stock-Based Compensation

6 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

NOTE 10. STOCK-BASED COMPENSATION

The Company recorded pretax compensation expense related to the grant of stock options and restricted stock issued of $376,738 and $585,195 for the three months ended June 30, 2020 and 2019 and $688,415 and $1,310,393 for the six months ended June 30, 2020 and 2019, respectively.

As of June 30, 2020, the Company had adopted seven separate stock option and restricted stock plans: (i) the 2005 Stock Option and Restricted Stock Plan (the “2005 Plan”), (ii) the 2006 Stock Option and Restricted Stock Plan (the “2006 Plan”), (iii) the 2007 Stock Option and Restricted Stock Plan (the “2007 Plan”), (iv) the 2008 Stock Option and Restricted Stock Plan (the “2008 Plan”), (v) the 2011 Stock Option and Restricted Stock Plan (the “2011 Plan”), (vi) the 2013 Stock Option and Restricted Stock Plan (the “2013 Plan”), (vii) the 2015 Stock Option and Restricted Stock Plan (the “2015 Plan”) and (vii) the 2018 Stock Option and Restricted Stock Plan (the “2018 Plan”). The 2005 Plan, 2006 Plan, 2007 Plan, 2008 Plan, 2011 Plan, 2013 Plan, 2015 Plan and 2018 Plan are referred to as the “Plans.”

These Plans permit the grant of stock options or restricted stock to its employees, non-employee directors and others for up to a total of 4,175,000 shares of common stock. The 2005 Plan terminated during 2015 with 19,678 shares not awarded or underlying options, which shares are now unavailable for issuance. Stock options granted under the 2005 Plan that remain unexercised and outstanding as of June 30, 2020 total 7,563. The 2006 Plan terminated during 2016 with 25,849 shares not awarded or underlying options, which shares are now unavailable for issuance. Stock options granted under the 2006 Plan that remain unexercised and outstanding as of June 30, 2020 total 39,750. The 2007 Plan terminated during 2017 with 89,651 shares not awarded or underlying options, which shares are now unavailable for issuance. Stock options granted under the 2007 Plan that remain unexercised and outstanding as of June 30, 2020 total 5,000. The 2008 Plan terminated during 2018 with 9,249 shares not awarded or underlying options, which shares are now unavailable for issuance. Stock options granted under the 2008 Plan that remain unexercised and outstanding as of June 30, 2020 total 31,250.

Our Board of Directors adopted the 2020 Stock Option and Restricted Stock Plan (the “2020 Plan”) on June 30, 2020. At the annual meeting of the Company’s stockholders to be held on September 9, 2020 (the “Annual Meeting”) the Company is asking its stockholders to approve the 2020 Plan and the reservation of 1,500,000 shares of common stock issuable under the 2020 Plan. The 2020 Plan would authorize us to issue 1,500,000 shares of Common Stock upon exercise of options and grant of restricted stock awards. No options have been granted under the 2020 Plan to date. The 2020 Plan would also authorize us to grant (i) to the key employees incentive stock options to purchase shares of Common Stock and non-qualified stock options to purchase shares of Common Stock and restricted stock awards and (ii) to non-employee directors and consultants non-qualified stock options and restricted stock. As of June 30, 2020, approximately 78 employees, two executive officers, and three non-employee directors were eligible to participate in the 2020 Plan.

The Company believes that such awards better align the interests of our employees with those of its stockholders. Option awards have been granted with an exercise price equal to the market price of its stock at the date of grant with such option awards generally vesting based on the completion of continuous service and having ten-year contractual terms. These option awards typically provide for accelerated vesting if there is a change in control (as defined in the Plans). The Company has registered all shares of common stock that are issuable under its Plans with the SEC, except for shares of Common Stock issuable under the 2020 Plan, which the Company expects to register after the Annual Meeting, if the 2020 Plan is approved by the Company’s stockholders. A total of 1,437 shares remained available for awards under the various Plans (other than the 2020 Plan) as of June 30, 2020, and a total of 1,500,000 shares of Common Stock remained available for awards under the 2020 Plan as of June 30, 2020, which awards are not available for grant until the 2020 Plan is approved by the Company’s stockholders at the Annual Meeting, or which awards are terminable if such approval is not obtained, depending on the type of award available under the 2020 Plan.

The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model.

Activity in the various Plans during the six months ended June 30, 2020:

Options	Number of Shares			Weighted Average Exercise Price
Outstanding at December 31, 2019		589,125		$	3.74
Granted		—			—
Exercised		(1,875	)		4.16
Forfeited		(3,937	)		(12.14	)
Outstanding at June 30, 2020		583,313		$	3.69
Exercisable at June 30, 2020		583,313		$	3.69

The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model. The total estimated grant date fair value stock options issued during the six months ended June 30, 2020 was $-0- as there were no grants during that period.

The Plans allow for the cashless exercise of stock options. This provision allows the option holder to surrender/cancel options with an intrinsic value equivalent to the purchase/exercise price of other options exercised. There were no shares surrendered pursuant to cashless exercises during the six months ended June 30, 2020 and 2019.

At June 30, 2020, the aggregate intrinsic value of options outstanding was approximately $187,800 and the aggregate intrinsic value of options exercisable was approximately $187,800. No options were exercised in the six months ended June 30, 2019.

As of June 30, 2020, the unrecognized portion of stock compensation expense on all existing stock options was $-0-.

The following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable options under the Company’s option plans as of June 30, 2020:

		Outstanding options			Exercisable options
Exercise price range		Number of options		Weighted average remaining contractual life	Number of options		Weighted average remaining contractual life

$	0.01 to $3.49		470,313	7.9 years		470,313		7.9 years
$	3.50 to $4.99		64,000	3.8 years		64,000		3.8 years
$	5.00 to $6.49		—	— years		—		— years
$	6.50 to $7.99		7,250	1.3 years		7,250		1.3 years
$	8.00 to $9.99		2,500	0.9 years		2,500		0.9 years
$	10.00 to $19.99		39,250	0.5 years		39,250		0.5 years

			583,313	6.8 years		583,313		6.8 years

Restricted stock grants. The Board of Directors has granted restricted stock awards under the Plans. Restricted stock awards are valued on the date of grant and have no purchase price for the recipient. Restricted stock awards typically vest over one to four years corresponding to anniversaries of the grant date. Under the Plans, unvested shares of restricted stock awards may be forfeited upon the termination of service to or employment with the Company, depending upon the circumstances of termination. Except for restrictions placed on the transferability of restricted stock, holders of unvested restricted stock have full stockholder’s rights, including voting rights and the right to receive cash dividends.

A summary of all restricted stock activity under the equity compensation plans for the six months ended June 30, 2020 is as follows:

	Number of Restricted shares			Weighted average grant date fair value
Nonvested balance, January 1, 2020		514,875		$	2.97
Granted		665,500			1.05
Vested		(410,375	)		(2.14	)
Forfeited		(35,250	)		(1.84	)
Nonvested balance, June 30, 2020		734,750		$	1.75

The Company estimated the fair market value of these restricted stock grants based on the closing market price on the date of grant. As of June 30, 2020, there were $505,271 of total unrecognized compensation costs related to all remaining non-vested restricted stock grants, which will be amortized over the next 18 months in accordance with their respective vesting scale.

The nonvested balance of restricted stock vests as follows:

Years ended	Number of shares

2020 (April 1, 2020 through December 31, 2020)		13,125
2021		480,250
2022		241,375