NOTE 5  STOCK-BASED COMPENSATION

On June 29, 2016, the Board of Directors amended the 2015 Stock Option Plan (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.

On June 3, 2019, under the Plan, the Company granted 1,000,000 incentive stock options to Donald Pettigrew, the Company’s President and Chief Executive Officer, whose vesting is contingent upon meeting net sales targets by each of the next three fiscal years through December 31, 2022.

As of June 30, 2019, the Company had 3,654,000 options outstanding to certain executives, key employees and consultants under the Plan, of which 1,300,000 were issued during the six months ended June 30, 2019.  Additionally, the Company had 1,000,000 performance based options outstanding as of June 30, 2019 to its President and Chief Executive Officer under the Plan, of which all were issued during the three months ending June 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 Share Options

The per share weighted average fair value of stock options granted during the six months ended June 30, 2019 and June 30, 2018 was $1.16 and $0.75, 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 six months ended June 30, 2019 and June 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:

Total stock-based compensation expense totaled $274,731 and $26,670 for the six months ended June 30, 2019 and 2018, respectively. Cash received from option exercises for the six months ended June 30, 2019 and 2018 was $24,700 and $51,250, respectively.

The weighted-average grant-date fair value of options granted during the six months ended June 30, 2019 and 2018, was $1.16 and $0.75, respectively.  The total intrinsic value of options exercised during the six months ended June 30, 2019 and 2018, was $12,796 and $30,664, respectively.

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

As of June 30, 2019, there was $2,308,052 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 41 months. The total fair value of shares vested as of June 30, 2019 and 2018, was $313,714 and $135,979, respectively.

Performance Based Share Options

The per share weighted average fair value of stock options granted during the six months ended June 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 six months ended June 30, 2019 and June 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:

Total performance stock-based compensation expense totaled $41,909 and zero for the six months ended June 30, 2019 and 2018, respectively.

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

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

As of June 30, 2019, there was $1,120,652 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 June 30, 2019 and 2018 was zero for both periods.