NOTE 13 – EMPLOYEE STOCK OPTIONS, RESTRICTED STOCK AWARD PLAN AND 401(k)

In June 2020, officers and directors of the Company voluntarily returned stock options that had previously been granted to them. In total, 2,265,000 options with a weighted average exercise price of $6.87 per share were returned to and cancelled by the Company. No grants, cash payments or other consideration has been or will be made to replace the options or otherwise in connection with the return. As a result of the return and cancellation of the options, the Company incurred additional compensation expense of $768,379.

During October and December 2020, as a result of changes to the executive team and the Board of Directors, the Company accelerated the vesting of 1,131,955 shares of restricted stock. As a result of the acceleration of these vestings, the Company incurred additional compensation expense of $2,361,362.

Compensation expense charged against income for share-based awards during the years ended December 31, 2020, 2019 and 2018 was $5,364,162, $3,082,625 and $3,870,934, respectively. These amounts are included in general and administrative expense in the accompanying Statements of Operations.

In 2011, the Company’s Board of Directors approved and adopted a long-term incentive plan, which was subsequently approved and amended by the shareholders. There were 341,155 shares eligible for grant, either as options or as restricted stock, as of December 31, 2020.

Employee Stock Options – No options have been granted in the years ended December 31, 2020, 2019 or 2018. All granted options vest at the rate of 20% each year over five years beginning one year from the date granted and expire ten years from the grant date. A summary of the status of the stock options as of December 31, 2020, 2019 and 2018 and changes during the years ended December 31, 2020, 2019 and 2018 is as follows:

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For the years ended December 31, 2020, 2019 and 2018, the Company incurred stock-based compensation expense related to stock options of $927,559, $625,855 and $1,853,913, respectively. As of December 31, 2020, there was $14,988 of unrecognized compensation cost related to stock options that will be recognized over a weighted average period of 0.6 years. The aggregate intrinsic value of options vested and expected to vest as of December 31, 2020 was $0. The aggregate intrinsic value of options exercisable at December 31, 2020 was $0. The year-end intrinsic values are based on a December 31, 2020 closing price of $0.66.

Options exercised of 193,000 in 2018 had an aggregate intrinsic value on the date of exercise of $1,470,230. No options were exercised in 2020 or 2019.

The following table summarizes information related to the Company’s stock options outstanding as of December 31, 2020:

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Restricted stock grants – Following is a table reflecting the restricted stock grants during 2018, 2019 and 2020:

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Restricted stock grants prior to 2020 vest at the rate of 20% each year over five years beginning one year from the date granted. Restricted stock grants in 2020 vest at a rate of 33% each year over three years beginning one year from the date granted. A summary of the status of restricted stock grants as of December 31, 2020, 2019 and 2018 and changes during the years ended December 31, 2020, 2019 and 2018 is as follows:

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For the years ended December 31, 2020, 2019 and 2018, the Company incurred stock-based compensation expense related to restricted stock grants of $4,436,603, $2,456,770 and $2,017,021, respectively. As of December 31, 2020, there was $1,520,839 of unrecognized compensation cost related to restricted stock grants that will be recognized over a weighted average period of 1.5 years.

During 2020, 2019 and 2018, 1,180,392, 187,136 and 64,620 shares of restricted stock vested, respectively. At the dates of vesting those shares had an aggregate intrinsic value of $801,133, $494,605 and $304,360, respectively.

401(k) Plan- In 2019, the Company initiated a sponsored 401(k) plan that is a defined contribution plan for the benefit of all eligible employees. The plan allows eligible employees, after a three-month waiting period, to make pre-tax or after-tax contributions of up to 100% of their annual eligible compensation, not to exceed annual limits established by the federal government. The Company makes matching contributions of up to 6% of any employee's compensation. Employees are 100% vested in the employer contribution upon receipt.

The following table presents the matching contributions expense recognized for the Company's 401(k) plan for the years ended December 31, 2020 and 2019. There were no matching contributions prior to 2019.

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