STOCK COMPENSATION

Phantom Shares:

Protexure Insurance Agency, Inc. (“Protexure”), a subsidiary of AmerInst, has employment agreements with

three

key members of senior management, which grant them phantom shares of the Company. Under these agreements, these employees were initially granted an aggregate of

63,765

phantom shares of the Company on the date of their employment, subject to certain vesting requirements. The phantom shares are eligible for phantom dividends payable at the same rate as regular dividends on the Company’s common shares. The phantom dividends

may

be used only to purchase additional phantom shares with the purchase price of such phantom shares being the net book value of the Company’s actual common shares as of the end of the previous quarter. During the

three

months ended

March

31,

2020,

phantom shares were granted.

76,403

phantom shares were outstanding at

March

31,

2020

and

December

31,

2019.

For these

three

employees, the phantom shares initially granted, as well as any additional shares granted from dividends declared, vested on

January

2015.

The liability payable to each of these employees under the phantom share agreements is equal to the value of the phantom shares based on the net book value of the Company’s actual common shares at the end of the previous quarter less the value of phantom shares initially granted and is payable in cash upon (i) the participant’s death, termination of employment due to disability, retirement at or after age

or resignation for good reason, (ii) termination of the participant by the Company without cause, (iii) termination by Participant without good reason or (iv) change in control.

The liability relating to these phantom shares is recalculated quarterly based on the net book value of our common shares at the end of each quarter. As a result of the overall decrease in the net book value of our common shares since the grant dates, we have

not

recorded any liability relating to these phantom shares at

March

31,

2020.

Stock Option Plan:

The Company has a nonqualified stock option plan to advance the development, growth and financial condition of the Company. This plan provides incentives through participation in the appreciation of its common stock in order to secure, retain and motivate directors and employees and align such person’s interests with those of its shareholders. A total of

100,000

shares are authorized under the stock option plan.

A summary of the status of the stock option plan as of

March

31,

2020

is as follows:

	Vested Shares		Weighted Average Exercise Price Per Share		Non-vested Shares			Weighted Average Exercise Price Per Share		Total Shares		Weighted Average Exercise Price Per Share
Outstanding—January 1, 20 20		16,400	$	28.34		28,600		$	28.65		45,000	$	28.54
Granted		—		—		—			—		—		—
Forfeited		—		—		—			—		—		—
Exercised		—		—		—			—		—		—
Vested		8,400		28.42		(8,400	)		28.42		—		—
Outstanding—March 31, 20 20		24,800	$	28.37		20,200		$	28.74		45,000	$	28.54
Options exercisable at year end		—		—		—			—		—		—
Weighted average fair value of options per share granted during the year		—		—	$	—			—	$	—		—
Remaining contractual life (years)		3.0				3.1					3.0

A summary of the status of the stock option plan as of

December

31,

2019

is as follows:

	Vested Shares		Weighted Average Exercise Price Per Share		Non-vested Shares			Weighted Average Exercise Price Per Share		Total Shares			Weighted Average Exercise Price Per Share
Outstanding—January 1, 2019		7,000	$	27.99		40,000		$	28.71		47,000		$	28.60
Granted		—		—		—			—		—			—
Forfeited		—		—		(2,000	)		30.14		(2,000	)		30.14
Exercised		—		—		—			—		—			—
Vested		9,400		28.60		(9,400	)		28.60		—			—
Outstanding—December 31, 2019		16,400	$	28.34		28,600		$	28.65		45,000		$	28.54
Options exercisable at year end		—		—		—			—		—			—
Weighted average fair value of options per share granted during the year		—		—	$	—			—	$	—			—
Remaining contractual life (years)		3.2				3.3					3.3

The Company accounts for these options in accordance with GAAP, which requires that the fair value of the equity awards be recognized as compensation expense over the period during which the employee is required to provide service in exchange for such an award. The Company is amortizing compensation expense over the vesting period, or

five

years. The Company recognized $(

11,955

) and

$72,046

of compensation expense for stock options for the

three

months ended

March

31,

2020

and for the year ended

December

31,

2019,

respectively.