Note

- Stock-Based Compensation; Changes in Equity

The Company has adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic

718

which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the condensed consolidated financial statements based on their grant-date fair values.

The Company has applied the Black-Scholes model to value stock-based awards and issued warrants related to notes payable. That model incorporates various assumptions in the valuation of stock-based awards relating to the risk-free rate of interest to be applied, the estimated dividend yield and expected volatility of our common stock. The risk-free rate of interest is the related U.S. Treasury yield curve for periods within the expected term of the option at the time of grant. The dividend yield on our common stock is estimated to be

as the Company did

not

issue dividends during

2019

and

2018.

The expected volatility is based on historical volatility of the Company’s common stock.

The Company’s net loss for the

three

months ended

September 30, 2019

and net loss for the

three

months ended

September 30, 2018

includes approximately

$20,000

and

$34,000,

respectively, of compensation costs related to share based payments. The Company’s net loss for the

nine

months ended

September 30, 2019

and

2018

includes approximately

$72,000

and

$139,000

respectively, of compensation costs related to share based payments. As of

September 30, 2019,

there was

$118,000

of unrecognized compensation expense related to non-vested stock option grants and stock grants. We expect approximately

$18,000

of additional stock-based compensation expense to be recognized over the remainder of

2019,

and

$56,000

to be recognized during

2020.

April 10, 2009,

the Board of Directors approved for adoption, and on

June 5, 2009,

the shareholders of the Corporation approved, a

2009

Stock Incentive Plan (

“2009

Plan”). The

2009

Plan and subsequent awards categorized as inducement of employment authorized the issuance of up to

510,000

shares of stock or options to purchase stock of the Company (including cancelled shares reissued under the plan.) On

June 8, 2018,

our shareholders approved the

2018

Stock Incentive Plan (

“2018

Plan”). The

2018

Plan authorizes the issuance of up to

300,000

shares of our common stock in the form of equity-based awards. Because

registration on Form S-

was filed for these additional shares within

months of approval by our shareholders, those additional shares are

not

available for issuance in the normal course. As of

September 30, 2019,

options for

471,144

shares remain outstanding.

A summary of the Company’s stock option activity, which includes grants of restricted stock, non-qualified stock options, incentive stock options, warrants and related information, is as follows:

	Shares under Option		Weighted Average Exercise Price
Balance at December 31, 2018		471,144	$	3.95
Granted		-		-
Cancelled/Expired		-		-
Exercised/Issued		-		-
Outstanding at September 30, 2019		471,144	$	3.95

Exercisable at September 30, 2019		165,264	$	4.05

The instruments above have an aggregate intrinsic value of

$83,000,

which represents the total pre-tax intrinsic value (the difference between the closing price of the Company’s common stock on the last trading day of the quarter ended

September 30, 2019

and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all the holders exercised their options on

September 30, 2019.