NOTE 5  STOCK-BASED COMPENSATION

On June 29, 2016, the Board of Directors amended the 2015 Stock Option Plan (as amended, the “Plan”)  authorizing the Company to grant awards to certain executives, key employees, and consultants under the Plan, which was approved by shareholders at the Annual Meeting held on September 6, 2016.  The total number of shares of Common Stock, with respect to which awards may be granted pursuant to the Plan, may not exceed 6,000,000 pursuant to an amendment to the Plan approved by shareholders on April 23, 2019 at the 2019 Annual Meeting of Shareholders.

As of September 30, 2019, the Company had 3,897,000 time based stock options outstanding to certain executives, key employees and consultants under the Plan, of which 1,650,000 were issued during the nine months ended September 30, 2019.  The Company also had 1,000,000 performance based options outstanding under the Plan as of September 30, 2019, to its President and Chief Executive Officer, of which all were issued during the nine months ending September 30, 2019.

On February 20, 2019, the Board of Directors of the Company approved an increase in compensation for each non-employee director from $25,000 to $50,000 annually effective January 1, 2019 and an additional $10,000 annually for the chair of each Board committee effective February 20, 2019, in each case to be paid quarterly half in cash and half in common stock at the end of each fiscal quarter.

Pursuant to Daniel S. Goldberger’s employment agreement dated October 12, 2018, on February 1, 2019, when Donald B. Pettigrew was appointed to President and Chief Executive Officer, Mr. Goldberger was awarded a performance bonus in the amount of $270,000 to be paid half in cash and half in stock on April 1, 2019.  The number of shares that were issued totaled 90,604 and was based upon the closing price of the Common Stock of the Company on February 1, 2019 as reported by the OTCQX.  These shares were issued on April 3, 2019.

2015 STOCK OPTION PLAN, as amended

Time Based Stock Options

The per share weighted average fair value of stock options granted during the nine months ended September 30, 2019 and September 30, 2018 was $1.33 and $0.68, respectively.  The fair value of each award is estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in the nine months ended September 30, 2019 and September 30, 2018. Historical information was the primary basis for the selection of the expected volatility, expected dividend yield and the expected lives of the options.  The risk-free interest rate was selected based upon yields of the U.S. Treasury issues with a term equal to the expected life of the option being valued.

The following table summarizes the status of the Plan with respect to time based stock options:

Total stock-based compensation expense totaled $473,139 and $51,592 for the nine months ended September 30, 2019 and 2018, respectively. Cash received from option exercises for the nine months ended September 30, 2019 and 2018 was $58,900 and $51,250, respectively.

The weighted-average grant-date fair value of options granted during the nine months ended September 30, 2019 and 2018, was $1.33 and $0.68, respectively.  The total intrinsic value of options exercised during the nine months ended September 30, 2019 and 2018, was $30,022 and $30,664, respectively.

The following table presents information pertaining to options outstanding at September 30, 2019:

As of September 30, 2019, there was $2,802,411 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 42 months. The total fair value of shares vested as of September 30, 2019 and 2018, was $506,729 and $139,569, respectively.

Performance Based Stock Options

The per share weighted average fair value of stock options granted during the nine months ended September 30, 2019 and 2018 was $1.16 and zero, respectively.  The fair value of each award is estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in the nine months ended September 30, 2019 and September 30, 2018.  Historical information was the primary basis for the selection of the expected volatility, expected dividend yield and the expected lives of the options.  The risk-free interest rate was selected based upon yields of the U.S. Treasury issues with a term equal to the expected life of the option being valued.

The following table summarizes the status of the Plan with respect to performance based stock options:

Total performance stock-based compensation expense totaled $167,636 and zero for the nine months ended September 30, 2019 and 2018, respectively.

The weighted-average grant-date fair value of options granted during the nine months ended September 30, 2019 and September 30, 2018, was $1.16 and zero, respectively.

The following table presents information pertaining to performance based options outstanding at September 30, 2019:

As of September 30, 2019, there was $994,925 of total unrecognized compensation cost related to non-vested performance share option based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 31 months. The total fair value of shares vested as of September 30, 2019 and 2018 was zero for both periods.