NOTE 11.  STOCK-BASED COMPENSATION PLAN



Under the Company’s current 2015 Stock Incentive Plan (the “2015 Plan”), the Company’s Board of Directors (the “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.  As of December 31, 2019, the number of shares authorized and reserved for issuance under the 2015 Plan is 6,655 shares, subject to automatic annual increase equal to 5% of the total number of shares of the Company’s outstanding common stock.



Options Granted:



During the year ended December 31, 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. The remaining 150 options issued 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 years ended December 31, 2019, 2018, and 2017 was $952, $6,059, and $1,020, respectively, which will be amortized as stock-based compensation expense 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.



On June 1, 2017, the Company issued and granted to an employee a restricted stock award of 500 restricted shares under the 2015 Plan, of which (i) 250 restricted shares will vest if, on or before June 1, 2022, the Fair Market Value (as defined in the Plan) of the Company’s common stock shall have equaled or exceeded $10.00 per share for twenty consecutive trading days; and (ii) 250 restricted shares will vest if, on or before June 1, 2022, the Fair Market Value (as defined in the Plan) of the Company’s common stock shall have equaled or exceeded $12.00 per share for twenty consecutive trading days.  For computing the fair value of the 500 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 $3,753 and June 1, 2017 was approximately $1,995.



The total non-cash stock compensation expense related to stock options and restricted stock awards recorded by the Company was as follows:







For the years ended December 31, 2019, 2018, and 2017, the majority of stock-based compensation costs were classified as selling, general and administrative expense.  A summary of changes in outstanding options and restricted stock awards during the year ended December 31, 2019 is as follows:





The following table summarizes the exercise price range, weighted average exercise price, and remaining contractual lives by significant ranges for options outstanding and exercisable as of December 31, 2019:







The intrinsic value of options exercised was $607,  $315, and $28 during the years ended December 31, 2019, 2018, and 2017, respectively.  The intrinsic value of restricted stock awards vested was $3,252,  $2,720, and $0 during the years ended December 31, 2019, 2018, and 2017, respectively.  Total fair value of options vested during the years ended December 31, 2019, 2018, and 2017 was $1,610,  $1,757, and $1,123, respectively.  Total fair value of restricted stock awards vested during the years ended December 31, 2019, 2018, and 2017 was $919,  $1,076, and $0, respectively.



The fair value of unvested restricted stock awards is determined based on the market price of our shares of common stock on the grant date or using the Monte-Carlo pricing model.  As of December 31, 2019, there were 1,209 unvested stock options and unrecognized compensation cost of $4,092 related to unvested stock options, as well as 600 unvested restricted stock awards and unrecognized compensation cost of $2,928 related to unvested restricted stock awards.  Unrecognized compensation cost of unvested stock options and restricted stock awards are expected to be recognized over the weighted average period of 2.9 years and 3.6 years, respectively.