Note 3 – Stock-based Compensation

Options

At September 30, 2018 the Company had four stock-based compensation plans, which are described more fully in Note 15 to the audited consolidated financial statements for the year ended December 31, 2017, contained in the Company’s most recently filed Annual Report on Form 10-K.

During the nine months ended September 30, 2018, the Company issued options to purchase 441,500 shares of common stock to the Company’s employees and options to purchase 85,000 shares of common stock to the Company’s non-employee directors as part of their annual compensation. During the same period, the Company cancelled options to purchase 1,058,420 shares of common stock as a result of employee resignations and natural expiration.

On June 1, 2018, the Company issued options to purchase 300,000 shares of common stock to the employees of NLEX, in connection with the Addendum to the Employment Agreements of David Ludwig and Tom Ludwig. As of September 30, 2018, 173,130 shares of common stock were issued pursuant to the exercise of these common stock options. The remaining 126,870 shares expired as of July 31, 2018.

The following summarizes the changes in common stock options for the nine months ended September 30, 2018:

	Options			Weighted Average Exercise Price
Outstanding at December 31, 2017		5,040,450		$	0.97
Granted		526,500		$	0.43
Exercised		(173,130	)	$	0.43
Forfeited		(1,058,420	)	$	1.71
Outstanding at September 30, 2018		4,335,400		$	0.59

Options exercisable at September 30, 2018		1,800,975		$	1.17

The Company recognized stock-based compensation expense related to stock options of $0.1 million and $0.2 million, respectively, for the three and nine months ended September 30, 2018. As of September 30, 2018, there is approximately $0.8 million of unrecognized stock-based compensation expense related to unvested option awards outstanding, which is expected to be recognized over a weighted average period of 3.0 years.

Restricted Stock

Restricted stock awards represent a right to receive shares of common stock at a future date determined in accordance with the participant’s award agreement. There is no exercise price and no monetary payment required for receipt of restricted stock awards or the shares issued in settlement of the award. Instead, consideration is furnished in the form of the participant’s services to the Company. Compensation cost for these awards is based on the fair value on the date of grant and recognized as compensation expense on a straight-line basis over the requisite service period.

On June 1, 2018, the Company granted 600,000 shares of Company restricted common stock in connection with the Addendum to the Employment Agreements of David Ludwig and Tom Ludwig. The shares are subject to certain restrictions on transfer and a right of repurchase over five years, ending May 31, 2023, and require a continued term of service to the Company. Stock-based compensation expense related to the restricted stock awards, calculated by using the grant date fair value of $0.43 per share, was $12,900 and $17,200 for the three and nine months ended September 30, 2018, respectively. The unrecognized stock-based compensation expense as of September 30, 2018 was approximately $0.2 million.