Stock Award Programs

3 Months Ended

Mar. 31, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Award Programs

The Company’s stock incentive plan is administered by the Compensation Committee and authorizes the grant or award of incentive stock options, non-qualified stock options (NQSO), restricted stock awards (RSA), stock appreciation rights, dividend equivalent rights, performance unit awards and phantom shares. The Company issues new shares of common stock upon the exercise of stock options. Any shares associated with options forfeited are added back to the number of shares that underlie stock options to be granted under the stock incentive plan. The Company has issued restricted stock awards and non-qualified stock option awards as described below.

Valuation of Stock Awards

Restricted Stock. The Company records the fair value of all restricted stock awards based on the grant date fair value and amortizes stock compensation on a straight-line basis over the vesting period. Restricted stock award shares are issued when granted and included in the total number of common shares issued but not included in total common shares outstanding until the vesting requirements have been met. As of March 31, 2019, there were 300,000 shares of restricted stock included in shares issued and outstanding. There were no restricted stock awards granted during the three month period ended March 31, 2019. During the three month period ended March 31, 2018, the Company granted 980,851 RSAs, of which i) 300,000 of RSAs were awarded as part of additional compensation plan to align key employees with the Company’s long term financial goals, and ii) 680,851 were awarded to members of the Company’s board of directors.

Non-Qualified Stock Options. The Company estimates the fair value of nonqualified stock awards using a Black-Scholes Option Pricing model (“Black-Scholes model”). The fair value of each stock award is estimated on the date of grant using the Black-Scholes model, which requires an assumption of dividend yield, risk free interest rates, volatility, forfeiture rates and expected option life. The risk-free interest rates are based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. Expected volatilities are based on the historical volatility of our common stock over the expected option term. The expected term of options granted is based on analyses of historical employee termination rates and option exercises. There were 25,000 of non-qualified stock option awards granted to a non-employee as compensation for investor relations services during the three month period ended March 31, 2019.

Restricted Stock Award Activity

A summary of RSA activity as of March 31, 2019 and 2018, and changes during the three month periods ended March 31, 2019 and 2018 are set forth below:

	2019				2018
NON-VESTED AWARDS	(Unaudited)
Non-vested awards outstanding, January 1,		300,000				-
Granted (+)		-				980,851	(2	)
Vested (-)		99,990	(1	)		-
Non-vested awards outstanding, March 31,		200,010	(3	)		980,851	(3	)
Weighted-average remaining contractual life (in years)		1.76				1.3
Unamortized RSA compensation expense	$	119,573			$	474,116
Aggregate intrinsic value of RSAs non-vested, March 31	$	84,004			$	568,894
Aggregate intrinsic value of RSAs vested, March 31	$	-			$	-

(1)  During the three month period ended March 31, 2019, 99,990 RSAs vested during the period.

(2)  During the three month period ended March 31, 2018, the Company granted 980,851 RSAs, of which i) 300,000 of RSAs were awarded as part of additional compensation plan to align key employees with the Company’s long term financial goals, and ii) 680,851 were awarded to members of the Company’s board of directors as part of their annual board retainer fee and vested during the period.

(3)  There were no RSAs that were cancelled or expired during the three month periods ended March 31, 2019 and 2018, respectively.

Non-Qualified Stock Option Award Activity

A summary of stock option activity as of March 31, 2019 and 2018, and changes during the three month periods ended March 31, 2019 and 2018 are set forth below:

	2019					2018
				Weighted				Weighted
				Average				Average
				Grant Date				Grant Date
	Shares			Fair Value		Shares		Fair Value
NON-VESTED AWARDS	(Unaudited)
Non-vested balances, January 1,		2,067,503		$	0.36		2,685,004	$	0.35
Granted (+)		25,000	(1)	$	0.15		-(1)	$	0.00
Non-vested balances, March 31,		2,092,503		$	0.35		2,685,004	$	0.35

	2019					2018
				Weighted					Weighted
				Average					Average
	Shares			Exercise Price		Shares			Exercise Price
OUTSTANDING AND EXERCISABLE AWARDS	(Unaudited)
Awards outstanding, January 1,		4,013,334		$	0.58		4,173,334		$	0.60
Granted (+)		25,000	(1)	$	0.41		-	(1)	$	0.00
Exercised (-)		-		$	0.00		50,000	(2)	$	0.44
Awards outstanding, March 31,		4,038,334		$	0.58		4,123,334		$	0.00
Awards vested and expected to vest,
March 31,		3,447,184		$	0.58		3,527,089		$	0.60
Awards outstanding and exercisable,
March 31,		1,945,831		$	0.56		1,438,330		$	0.62

(1) During the three month period ended March 31, 2019, there were NQSO grants of 25,000 granted to a non-employee as compensation for investor relations services. This stock award grant was valued using a Black-Scholes model that assumed a 1-year vesting period, 2-year option term, a risk free rate of 2.5%, volatility of 64.6%, no assumed dividend yield, and a forfeiture rate estimate of 1.2%. During the three month period ended March 31, 2018, there were no grants of non-qualified stock options.

(2) The total intrinsic value of stock options exercised during the three month ended March 31, 2018 was approximately $5,500.

The weighted-average remaining contractual life of the non-qualified stock options outstanding, exercisable, and vested and expected to vest as of March 31, 2019 were 2.9 years, 2.7 years and 2.7 years, respectively.

The aggregate intrinsic value associated with options outstanding, vested and expected to vest, and exercisable as of March 31, 2019 was approximately $7,250, $6,209 and $3,625, respectively. Aggregate intrinsic value represents total pretax intrinsic value (the difference between WidePoint’s closing stock price on March 31, 2019 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 31, 2019. The intrinsic value will change based on the fair market value of WidePoint’s stock.

Share-Based Compensation Expense

Share-based compensation (including restricted stock awards) represents both stock options based expense and stock grant expense. The following table sets forth the composition of stock compensation expense included in general and administrative expense for the periods then ended:

	THREE MONTHS ENDED
	MARCH 31,
	2019		2018
	(Unaudited)
Restricted stock compensation expense	$	16,737	$	49,884
Non-qualified option stock compensation expense		72,529		74,520
Total share-based compensation before taxes	$	89,266	$	124,404

At March 31, 2019, the Company had approximately $394,600 of total unamortized share-based compensation expense, net of estimated forfeitures, related to stock option plans that will be recognized over the weighted average remaining period of 1.1 years.