Accounting for Stock-Based Compensation

During the

three

month periods ended

June 30, 2020

and

2019,

the Company granted

323,000

and

24,000,

respectively, of stock options to employees or directors. The Company recognized

$55,000

and

$10,000,

respectively, of stock-based compensation expense for the

three

month periods ended

June 30, 2020

and

2019.

During the

six

month periods ended

June 30, 2020

and

2019,

the Company granted

323,000

and

24,000,

respectively, of stock options to employees and directors. The Company recognized

$74,000

and

$14,000,

respectively, of stock-based compensation expense for the

six

month periods ended

June 30, 2020

and

2019.

During the

three

month periods ended

June 30, 2020

and

2019,

14,000

and

14,000

were exercised under the

2005

Plan, respectively. During the

six

month periods ended

June 30, 2020

and

2019,

186,600

and

280,500

were exercised under the

2005

Plan, respectively.

Valuation Assumptions

The fair values of employee and director option awards were estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions:

	For Three Months Ended June 30, 2020			For Three Months Ended June 30, 2019			For Six Months Ended June 30, 2020			For Six Months Ended June 30, 2019

Weighted average grant date fair value	$	2.80		$	3.61		$	2.80		$	3.61
Weighted average assumptions used:
Expected dividend yield		0.0	%		0.0	%		0.0	%		0.0	%
Risk-free interest rate		0.43	%		2.19	%		0.43	%		2.19	%
Expected volatility		76.00	%		127.52	%		76.00	%		127.52	%
Expected life (in years)		6.2			5.0			6.2			5.0

Expected volatility is based on historical volatility and in part on implied volatility. The expected term considers the contractual term of the option as well as historical exercise and forfeiture behavior. The risk-free interest rate is based on the rates in effect on the grant date for U.S. Treasury instruments with maturities matching the relevant expected term of the award. Options granted to non-employees are valued using the fair market value on each measurement date of the option.