4. Accounting for Stock-based Compensation

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

Accounting for Stock-Based Compensation

4. Accounting for Stock-Based Compensation

During the three month periods ended September 30, 2020 and 2019, the Company granted 10,000 and none, respectively, of stock options to employees or directors. The Company recognized $100,000 and $10,000, respectively, of stock-based compensation expense for the three month periods ended September 30, 2020 and 2019. During the nine month periods ended September 30, 2020 and 2019, the Company granted 333,000 and 24,000, respectively, of stock options to employees and directors. The Company recognized $174,000 and $24,000, respectively, of stock-based compensation expense for the nine month periods ended September 30, 2020 and 2019.

During the three month periods ended September 30, 2020 and 2019, 133,000 (30,000 under 2015 plan and 103,000 under the 2005 Plan) and 10,500 (2005 Plan) options were exercised, respectively. During the nine month periods ended September 30, 2020 and 2019, 319,600 (45,000 under the 2015 Plan and 274,600 under the 2005 Plan) and 291,000 (2005 Plan) options were exercised, 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 September 30, 2020			For Three Months Ended September 30, 2019		For Nine Months Ended September 30, 2020			For Nine Months Ended September 30, 2019
Weighted average grant date fair value		4.98			–	$	2.86		$	3.61
Weighted average assumptions used:
Expected dividend yield		0.0	%		–		0.0	%		0.0	%
Risk-free interest rate		0.23	%		–		0.42	%		2.19	%
Expected volatility		70.85	%		–		76.85	%		127.52	%
Expected life (in years)		5.0			–		6.13			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.