Stock Award Programs

6 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [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 and outstanding. During the six month period ended June 30, 2019, the Company granted 662,740 RSAs. During the six month period ended June 30, 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 six month period ended June 30, 2019.

Restricted Stock Award Activity

A summary of RSA activity as of June 30, 2019 and 2018, and changes during the six month periods ended June 30, 2019 and 2018 are set forth below:

	2019			2018
NON-VESTED AWARDS	(Unaudited)
Non-vested awards outstanding, January 1,		300,000			-
Granted (+)		662,740	(1)		980,851	(1)
Cancelled (-)		50,000	(2)		-
Vested (-)		238,572	(3)		-
Non-vested awards outstanding, June 30,		674,168			980,851
Weighted-average remaining contractual life (in years)		6.77			1.1
Unamortized RSA compensation expense	$	274,412		$	356,082
Aggregate intrinsic value of RSAs non-vested, June 30	$	283,151		$	539,468
Aggregate intrinsic value of RSAs vested, June 30	$	-		$	-

(1) During the six month period ended June 30, 2019, the Company granted 662,740 RSAs, of which i) 238,572 of RSAs were awarded to members of the Company’s board of directors as part of their annual board retainer fee that had a grant date fair value of $100,200 and vested during the period, and ii) 424,168 of RSAs were awarded to key employees tied to the attainment of certain financial goals as outlined by the Company’s Compensation Committee of the Board of Directors that had a grant date fair value of $254,501. During the six month period ended June 30, 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.

(2) There were 50,000 RSAs that were cancelled during the six month period ended June 30, 2019. There were no RSAs cancelled or expired during the six month period ended June 30, 2018, respectively.

(3) During the six month period ended June 30, 2019, 238,572 RSAs vested during the period.

Non-Qualified Stock Option Award Activity

A summary of stock option activity as of June 30, 2019 and 2018, and changes during the six month periods ended June 30, 2019 and 2018 are set forth below:

	2019					2018
				Weighted					Weighted
				Average					Average
				Grant Date					Grant Date
NON-VESTED AWARDS	Shares			Fair Value		Shares			Fair Value
	(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
Cancelled (-)		80,001	(2)	$	0.34		-	(2)	$	0.00
Vested/Exercised (-)		500,000		$	0.40		50,000	(3)	$	0.40
Non-vested balances, June 30,		1,512,502		$	0.34		2,635,004		$	0.35

	2019					2018
				Weighted					Weighted
				Average					Average
OUTSTANDING AND EXERCISABLE AWARDS	Shares			Exercise Price		Shares			Exercise Price
	(Unaudited)
Awards outstanding, January 1,		4,013,334		$	0.58		4,173,334		$	0.60
Granted (+)		25,000	(1)	$	0.41		-	(1)	$	0.00
Cancelled (-)		80,001	(2)	$	0.55		60,000	(2)	$	1.48
Exercised (-)		-			-		50,000	(3)	$	0.44
Awards outstanding, June 30,		3,958,333		$	0.58		4,063,334		$	0.00
Awards vested and expected to vest,
June 30,		3,483,356		$	0.59		3,481,526		$	0.58
Awards outstanding and exercisable,
June 30,		2,445,831		$	0.59		1,438,330		$	0.58

(1) During the six month period ended June 30, 2019, there were non-qualified stock option (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 six month period ended June 30, 2018, there were no grants of non-qualified stock options.

(2) During the six month period ended June 30, 2019, there were 80,001 NQSOs that were unvested and cancelled related to voluntary employee terminations.

(3) The total intrinsic value of stock options exercised during the six month ended June 30, 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 June 30, 2019 were 2.6 years, 2.3 years and 2.3 years, respectively.

The aggregate intrinsic value associated with options outstanding, vested and expected to vest as of June 30, 2019 was approximately $250 and $247, respectively. Aggregate intrinsic value represents total pretax intrinsic value (the difference between WidePoint’s closing stock price on June 30, 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 June 30, 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				SIX MONTHS ENDED
	JUNE 30				JUNE 30
	2019		2018		2019		2018
	(Unaudited)
Restricted stock compensation expense	$	180,863	$	118,034	$	197,600	$	167,918
Non-qualified option stock compensation expense		103,248		77,900		175,777		152,420
Total share-based compensation before taxes	$	284,111	$	195,934	$	373,377	$	320,338

At June 30, 2019, the Company had approximately $473,485 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 year.