Stock Based Compensation

The Company recognizes all stock-based compensation to employees and directors, including awards of stock options and restricted stock, in the financial statements as compensation cost over the applicable vesting periods based on the fair value of the awards on the date of grant. Total stock-based compensation expense included in selling, general and administrative expense in 2019 and 2018 was $2.7 million and $1.0 million, respectively. The amount recorded for the years ended December 31, 2019 and 2018 was recorded net of benefits of $121,000 and $18,000, respectively, as a result of forfeitures of unvested stock awards prior to the completion of the requisite service period or failure to meet requisite performance targets. The amount of total stock-based compensation includes $2.2 million and $0.7 million in 2019 and 2018, respectively, relating to restricted stock awards.

The Company has 2.0 million shares of common stock reserved for stock-based awards under its Amended and Restated 2015 Equity Incentive Plan (“2015 Plan”). The 2015 Plan provides for the grant of several different forms of stock-based awards, including stock options to purchase shares of the Company's common stock. Stock options granted under the 2015 Plan may be incentive stock options or non-qualified stock options. Generally, stock options are nontransferable other than upon death. Stock options generally vest over a one to three year period and expire ten years after the date of the grant. The Compensation Committee of the Board of Directors (Compensation Committee) has authority to administer the 2015 Plan and determine the material terms of option and other awards under the 2015 Plan.

Prior to the 2015 Plan, the Company had 2.25 million shares of common stock reserved for stock-based awards under its 2005 Equity Incentive Plan (the “2005 Plan”). The 2005 Plan provided for the award of both incentive stock options and non-qualified stock options and restricted stock awards, including both time and performance vesting. Stock options granted under the 2005 Plan are nontransferable other than upon death, generally vest over a one to three year period and expire ten years from the date of grant. Upon approval of the 2015 Plan, no further awards were available for grant under the 2005 Plan and no awards have been made under the 2005 Plan since 2015.

The below table presents information with respect to stock options under the 2015 Plan and the 2005 Plan:



	No. of Shares (in thousands)		Weighted Average Exercise Price		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2018	678		$	7.89	$	12,605
Options granted	122		24.87
Options exercised	(256	)	5.60
Forfeited and canceled	(144	)	7.18
Expired	—		—
Outstanding at December 31, 2019	400		$	14.50
Vested and expected to vest at December 31, 2019	376		$	9.81
Total shares exercisable as of December 31, 2019	152		$	9.05
Shares remaining available for grant	1,100

The weighted average grant date fair value of stock options granted during 2019 and 2018 was $24.87 and $19.36, respectively. The total intrinsic value of stock options exercised during the year ended December 31, 2019 was $5.4 million. The total intrinsic value of stock options exercised during the year ended December 31, 2018 was $1.6 million. New shares of the Company’s common stock are issued as a result of stock option exercises in 2019 and for options exercised in 2018.

The fair value of options at the date of the grant was estimated using the Black-Scholes model with the following assumptions for the respective period ending December 31:



	2019		2018
Expected option life	3.0 years		3.7 years
Weighted average risk-free interest rate	2.0	%	2.2	%
Weighted average expected volatility	35	%	36	%
Expected dividend yield	0	%	0	%

For the years ended 2019 and 2018, the expected option life was based on the Company’s historical experience with similar type options. Expected volatility is based on historic volatility levels of the Company’s common stock over the preceding period of time consistent with the expected life. The risk-free interest rate is based on the implied yield currently available on U.S. Treasury zero coupon issues with a remaining term equal to the expected life. Stock options outstanding at December 31, 2019 are summarized as follows:



Range of Exercise Prices	Number Outstanding (in thousands)	Weighted Average Remaining Life	Weighted Average Exercise Price

$4.06 - $24.87	400	7.97 years	$	14.50

At December 31, 2019, the aggregate unrecognized compensation cost of unvested equity awards, as determined using a Black-Scholes option valuation model, was $1.8 million (net of estimated forfeitures) which is expected to be recognized as compensation expense in fiscal years 2020 through 2022. The Company has not paid cash dividends on its common stock, and the Company presently intends to continue to retain earnings for reinvestment in growth opportunities. Accordingly, it is anticipated no cash dividends will be paid in the foreseeable future.

Current year activity with respect to the Company’s non-vested restricted stock awards is as follows:



Non-vested restricted stock awards	Shares (in thousands)		Weighted Average grant- date fair value
Balance at January 1, 2019	193		$	9.88
Granted	225		24.77
Vested	(13	)	13.32
Forfeited and canceled	(53	)	24.18
Balance at December 31, 2019	352		$	23.08

The Plan also provides for the issuance of restricted stock and restricted stock units. These types of awards can have service based and/or performance based vesting. Grants of restricted stock with service based vesting are subject to vesting periods ranging from 1 to 3 years. Grants of restricted stock with performance based vesting are subject to a vesting period of 1 to 3 years and performance targets as defined by the Compensation Committee. The Company assesses the likelihood of achievement throughout the performance period and recognizes compensation expense associated with its performance awards based on this assessment. Other terms and conditions applicable to any award of restricted stock will be determined by the Compensation Committee and set forth in the agreement relating to that award.

During 2019 and 2018, the Company granted 225,000 and 79,000 restricted stock awards, respectively, at a per share price of $0.02. For the periods ended 2019 and 2018, the Company recognized compensation expense related to performance awards based on its estimate of the probability of achievement in accordance with ASC Topic 718.

The fair value of restricted stock awards is based on the average price of the Company’s common stock on the date of grant. The weighted average grant date fair value of restricted stock awards granted during the years 2019 and 2018 was $24.77 and $17.08, respectively. In accordance with the terms of the restricted stock award agreements, the Company released 13,000 and 31,000 shares during 2019 and 2018, respectively. During 2019, there were approximately 53,000 shares of restricted stock canceled, 38,000 of which were performance based restricted shares. During 2018, there were 13,000 shares of restricted stock canceled, of which 12,000 were performance based restricted shares.