NOTE 10.  STOCK-BASED COMPENSATION PLAN



Under the Company’s current 2015 Stock Incentive Plan (the “2015 Plan”), the Company’s Board of Directors has flexibility to determine the type and amount of awards to be granted to eligible participants, who must be employees, directors, officers or consultants of the Company or its subsidiaries.  The 2015 Plan allows for grants of incentive stock options, nonqualified stock options, restricted stock awards, stock appreciation rights, and restricted units.  The aggregate number of shares of common stock that may be granted through awards under the 2015 Plan to any employee in any calendar year may not exceed 500 shares.  The 2015 Plan will continue in effect until December 2025 unless terminated sooner. 



During the nine months ended September 30, 2019, the Company issued stock options for an aggregate of 188 shares under the 2015 Plan to directors and employees of the Company.  Of the 188 options issued, 38 options vest in four equal consecutive quarterly tranches from the date of grant.  150 vest in three equal tranches on June 5, 2020, 2021 and 2022.



For computing the fair value of the stock-based awards, the fair value of each option grant has been estimated as of the date of grant using the Black-Scholes option-pricing model with the following assumptions:











Using these assumptions, the fair value of the stock options granted during the nine months ended September 30, 2019 was $952, which will be recognized over the vesting period of the options.



Market Condition Restricted Shares Granted:



On January 7, 2019, the Company issued and granted to an employee a restricted stock award of 350 restricted shares under the 2015 Plan, that will vest as follows: (A) the stock award will vest and become nonforfeitable if, on or before January 7, 2024, the closing price of the Company’s common stock shall have equaled or exceeded $15.00 per share for twenty consecutive trading days (such 20th day being the “Price Trigger Date”); and (B) once the Price Trigger Date occurs, (i) 117 shares of the Company’s common stock shall vest on each of the first and second anniversary of the Price Trigger Date; and (ii) 116 shares of the Company’s common stock shall vest on the third anniversary of the Price Trigger Date. For computing the fair value of the 350 restricted shares with a market condition, the fair value of each restricted stock award grant has been estimated as of the date of grant using the Monte-Carlo pricing model with the assumptions below.



On January 7, 2019, the Company issued and granted to an employee a restricted stock award of 150 restricted shares under the 2015 Plan, that will vest as follows: (A) the stock award will vest and become nonforfeitable if, on or before January 7, 2024, the closing price of the Company’s common stock shall have equaled or exceeded $15.00 per share for twenty consecutive trading days (such 20th day being the Price Trigger Date); and (B) once the Price Trigger Date occurs, the shares shall equally vest on each of the first, second, third and fourth anniversary of the Price Trigger Date.  For computing the fair value of the 150 restricted shares with a market condition, the fair value of each restricted stock award grant has been estimated as of the date of grant using the Monte-Carlo pricing model with the assumptions below.







Using these assumptions, the fair value of the market condition restricted stock awards granted on January 7, 2019 was approximately $3,962.



The total non-cash stock compensation expense related to restricted stock, stock options and stock awards recorded by the Company for the three months ended September 30, 2019 and 2018 was $678 and $912, respectively, and for the nine months ended September 30, 2019 and 2018 was $2,246 and $2,067, respectively.  For the three and nine months ended September 30, 2019 and 2018, the majority of stock-based compensation costs were classified as selling, general and administrative expenses.



As of September 30, 2019, there were 1,685 unvested stock options and unrecognized compensation cost of $4,587 related to unvested stock options, as well as 600 unvested restricted stock awards and unrecognized compensation costs of $3,136 related to unvested restricted stock awards.