Note 11 - Share-Based Compensation

Share-based compensation represents the cost related to share-based awards, typically stock options or stock grants, granted to employees, non-employees, officers and directors. Share-based compensation is measured at grant date, based on the estimated aggregate fair value of the award on the grant date, and such amount is charged to compensation expense on a straight-line basis over the requisite service period. For the years ended December 31, 2019 and 2018, the share-based compensation expense of $1.8 million and $1.4 million, respectively, is reflected in general and administrative expenses in the consolidated Statements of Operations.

Share-based awards have historically been made as stock options, and recently also as stock grants, issued pursuant to the terms of the Company’s stock option and stock incentive plans, (collectively, the “Plans”), described below. The Plans may be administered by the Board of Directors or the Compensation Committee of the Board or by another committee appointed by the Board from among its members as provided in the Plans. Presently, the Plans are administered by the Company’s Compensation Committee of the Board of Directors. As of December 31, 2019, the Plans authorized the issuance of stock options to purchase 7,000,000 shares of the Company’s common stock and, as of December 31, 2019 there were 77,400 shares of the Company’s common stock available for issuance for future stock option grants or other stock based awards.

Stock option awards, which allow the recipient to purchase shares of the Company’s common stock at a fixed price, are typically granted at an exercise price equal to the Company’s stock price at the date of grant. Typically, the Company’s stock option awards have vested from immediately to two years from the grant date and have had a contractual term ranging from three to ten years.

During the years ended December 31, 2019 and 2018, the Company issued options to purchase 3,164,800 shares and 3,874,200 shares, respectively. During the years ended December 31, 2019 and 2018, the Company issued stock grants of 16,129 shares and 199,291 shares, respectively.

Effective September 17, 2014, the Company adopted its 2014 Stock Incentive Plan (“2014 Plan”) pursuant to which 3,000,000 shares of common stock were reserved for issuance (i) upon the exercise of options, designated as either ISOs under the Code or nonqualified options, or (ii) as stock, deferred stock or other stock-based awards. ISOs may be granted under the 2014 Plan to employees and officers of the Company. Non-qualified options, stock, deferred stock or other stock-based awards may be granted to consultants, directors (whether or not they are employees), employees or officers of the Company. Stock appreciation rights may also be issued in tandem with stock options. Unless the 2014 Plan is sooner terminated, the ability to grant options or other awards under the 2014 Plan will expire on September 17, 2024.

ISOs granted under the 2014 Plan may not be granted at a price less than the fair market value of the common stock on the date of grant (or 110% of fair market value in the case of persons holding 10% or more of the voting stock of the Company). Nonqualified options granted under the 2014 Plan may not be granted at a price less than the fair market value of the common stock. Options granted under the 2014 Plan expire not more than ten years from the date of grant (five years in the case of ISOs granted to persons holding 10% or more of the voting stock of the Company).

Effective June 7, 2018, the Company adopted its 2018 Stock Incentive Plan (“2018 Plan”) pursuant to which 4,000,000 shares of common stock were reserved for issuance (i) upon the exercise of options, designated as either ISOs under the Code or nonqualified options, or (ii) as stock, deferred stock or other stock-based awards. ISOs may be granted under the 2018 Plan to employees and officers of the Company. Non-qualified options, stock, deferred stock or other stock-based awards may be granted to consultants, directors (whether or not they are employees), employees or officers of the Company. Stock appreciation rights may also be issued in tandem with stock options. Unless the 2018 Plan is sooner terminated, the ability to grant options or other awards under the 2018 Plan will expire on June 7, 2028.

ISOs granted under the 2018 Plan may not be granted at a price less than the fair market value of the common stock on the date of grant (or 110% of fair market value in the case of persons holding 10% or more of the voting stock of the Company). Nonqualified options granted under the 2018 Plan may not be granted at a price less than the fair market value of the common stock. Options granted under the 2018 Plan expire not more than ten years from the date of grant (five years in the case of ISOs granted to persons holding 10% or more of the voting stock of the Company).

All stock options have been granted to employees and non-employees at exercise prices equal to or in excess of the market value on the date of the grant.

The Company determines the fair value of share based awards at the grant date by using the Black-Scholes option-pricing model, and has utilized the “simplified” method, as prescribed by the SEC’s Staff Accounting Bulletin (“SAB”) No.110, Share-Based Payment, to compute expected lives of share based awards with the following weighted-average assumptions:


Years ended
December 31,	2019		2018
Assumptions
Dividend yield	0	%	0	%
Risk free interest rate	1.43%-2.47	%	2.51%‑2.86	%
Expected volatility	65%-76	%	43%‑65	%
Expected lives	3-5 years		3 years

A summary of the activity for the Company’s Plans for the indicated periods is presented below:


		Weighted
		Average
Stock Option Plan Totals	Shares	Exercise Price
Outstanding at December 31, 2017	3,069,440	$	4.28
-Cancelled	(2,523,243)	$	4.92
-Exercised	(5,000)	$	3.43
-Granted	3,874,200	$	1.19
Outstanding at December 31, 2018	4,415,397	$	1.20
-Cancelled	(527,820)	$	1.23
-Exercised	(10,000)	$	0.89
-Granted	3,164,800	$	0.79
Outstanding at December 31, 2019	7,042,377	$	1.01

Options to purchase approximately 3.2 million shares were granted in 2019, of which approximately 2.1 million vested in 2019, and approximately 1.1 million will vest in 2020. In 2019, options to purchase approximately 0.5 million shares were cancelled, mainly relating to options expired or forfeited.

The following is the weighted average contractual life in years and the weighted average exercise price at December 31, 2019 and 2018 of:


		Weighted
		Average
		Remaining	Weighted
	Number of	Contractual	Average
2019	Options	Life	Exercise Price
Options outstanding	7,042,377	5.0 years	$	1.01
Options vested	5,922,377	4.0 years	$	1.06
Options unvested	1,120,000	10.0 years	$	0.75


		Weighted
		Average
		Remaining	Weighted
	Number of	Contractual	Average
2018	Options	Life	Exercise Price
Options outstanding	4,415,397	2.7 years	$	1.20
Options vested	2,258,338	2.6 years	$	1.29
Options unvested	2,157,059	2.9 years	$	1.10

The intrinsic values of options outstanding at December 31, 2019 and 2018 are $0.7 million and $0, respectively.

The intrinsic value of options unvested at December 31, 2019 and 2018 are $0.3 million and $0, respectively.

The intrinsic values of options vested and exercised during the years ended 2019 and 2018 were as follows:


	2019		2018
Intrinsic value of options vested	$	436,000	$	0
Intrinsic value of options exercised	$	11,100	$	13,950