Incentive Stock Plans

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Stock Plans

NOTE 15 – STOCK PLANS

The Unico American Corporation 2011 Incentive Stock Plan (“2011 Plan”) covers 200,000 shares of the Company’s common stock (subject to adjustment in the case of stock splits, reverse stock splits, stock dividends, etc.) and was approved by shareholders on May 26, 2011. Options to purchase 8,760 and 91,240 shares of common stock were granted under the 2011 Plan to one non-executive employee during the years ended December 31, 2012 and 2011, respectively. Due to termination of the employee during 2017, all options granted under the 2011 Plan became null and void. As of December 31, 2017, there are no outstanding options under the 2011 Plan.

No options were granted to employees or non-employees during the years ended December 31, 2017 and 2016.

The Company recognized stock-based compensation expense in the amount of $11,552 and $23,104 for all awards issued under the 2011 Plan in the “Salaries and employee benefits” line item in the Consolidated Statements of Operations in each year ended December 31, 2017 and 2016, respectively. As of December 31, 2017, there was no unrecognized compensation cost.

The fair value of each option award is estimated on the date of the grant using the Black-Scholes Option-Pricing Model using a number of complex and subjective variables. These variables include expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, a risk-free interest rate and expected dividends.

Expected dividend yield is based on the historical dividend behavior as well as the expected dividend behavior of the Company. Expected volatility is based on the historical volatility of the Company’s stock. The risk-free rate for periods within the contractual life of the option is based on the U.S. treasury yield curve for a ten-year treasury in effect at the time of grant. The expected term represents an estimate of time the options are expected to remain outstanding. In accordance with ASC Topic 718, “Compensation – Stock Compensation”, the Company estimates forfeitures at the time of the grant and revises those estimates in subsequent periods if the actual forfeitures differ from those estimates.

The average assumptions used to value each option award granted during the years ended December 31, 2012 and 2011 are as follows:

	Years ended December 31
	2012			2011
Weighted-average grant date fair value	$	3.21		$	2.53
Expected dividend yield		1.91	%		3.12	%
Expected volatility		28.01	%		28.74	%
Risk-free interest rate		1.94	%		2.02	%
Expected term (years)		10.00			10.00
Expected forfeiture		0.00	%		0.00	%

The following table summarizes stock option activity for year ended December 31, 2017:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Terms		Aggregate Intrinsic Value
Outstanding at December 31, 2016		100,000	$	10.96		4.67	$	—
Granted		—		—		—		—
Forfeited or expired		100,000		—		—		—
Exercised		—		—		—		—
Outstanding at December 31, 2017		—		—		—	$	—
Exercisable at December 31, 2017		—		—		—	$	—