Note

12.

Stock Options, Incentive Plans, Stock Awards, and Employee Benefit Plan

Stock Option Plans:

The Company's

2015

Equity Incentive Plan provides for the grant of incentive stock options as defined in Section

422

of the Internal

Revenue Code and the grant of Stock Options, Restricted Stock, Restricted Stock Units, Performance Awards, or other Awards to employees, non-employee directors, and consultants. The Board of Directors has authorized

5,000,000

shares of common capital stock for issuance under the

2015

Equity Incentive Plan, including automatic increases provided for in the

2015

Equity Incentive Plan through fiscal year

2025.

The number of shares of common stock reserved for issuance under the

2015

Equity Incentive Plan will automatically increase, with

further action by the stockholders, on the

first

business day of each fiscal year during the term of the

2015

Equity Incentive Plan, beginning

January 1, 2016,

in an amount equal to

of the issued and outstanding shares of common stock on the last day of the immediately preceding year, or such lesser amount if so determined by the Board or the Plan Administrator. During

2020

, the Company granted

1,634,000

shares of stock to several employees as incentive compensation or new-hire bonuses. During

2020

, the Company issued

332,267

restricted stock units to employees as a new hire bonus and directors.

Treasury Stock

: The Company also purchased

121,867

shares of common stock with a value of

$227,766

to cover the employee's share of tax liabilities

related to the vesting of commons stock and restricted stock units.

Stock Awards

: The Company has granted restricted stock awards to its employees at different periods from

2005

through

2020.

The majority of the shares

granted to those employees vest

years from the grant date and are forfeited in the event that the recipient's employment relationship with the Company is terminated prior to vesting.

During

2020

, a portion of the restricted stock awards were granted, but

not

issued and are

not

listed as outstanding in the financial statements for

2020

Stock-based compensation expense related to stock and restricted stock awards was

$1,475,328

for

2020

and

$1,292,419

for

2019

A summary of stock awards outstanding and

2020

activities are as follows:

						Weighted Average
				Weighted Average		Contractual		Aggregate Intrinsic
Stock Awards	Shares			Exercise Price		Remaining Life		Value
Outstanding, December 31, 2019		4,023,780		$	2.25
Granted		1,634,000			1.20
Vested		(106,667	)		—
Forfeited		(450,000	)		—

Outstanding, December 31, 2020		5,101,113		$	1.96		6.94	$	0.71

Expected to Vest after December 31, 2020		5,101,113		$	1.96		6.94	$	0.71

As of

December 31, 2020

, there were

$5,926,872

of unrecognized compensation costs related to the un-vested share-based compensation arrangements granted. The cost is expected to be recognized over the weighted average remaining contractual life of

6.94

years.

The aggregate intrinsic value represents the difference between the weighted average exercise price and the closing price of the Company's stock on

December 31, 2020

, or

$2.67.

Employee Stock Purchase Plan

: The Company established the

1999

Employee Stock Purchase Plan (“ESPP”) under the requirements of Section

423

of the

Internal Revenue Code to allow eligible employees to purchase the Company's common stock at regular intervals. Participating employees

may

purchase common stock through voluntary payroll deductions at the end of each participation period at a purchase price equal to

85%

of the lower of the fair market value of the common stock at the beginning or the end of the participation period. The Company issued -

- shares from the ESPP in

2020

and

2019

, respectively. The ESPP is

longer active.

Stock Warrants

: On

August 21, 2018,

the Company issued University Fancards, LLC a warrant to purchase

150,000

shares of the Company's common

stock.

30,000

warrants vested immediately upon the date on which the

first

financial transaction was processed on a card account issued under the prepaid agreement, which occurred on

October 5, 2018.

120,000

warrants vest annually over

years in

30,000

warrant increments beginning on

July 31, 2019

and becoming fully vested on

July 31, 2022.

The exercise price for the

30,000

warrants that vested immediately on

October 5, 2018

was

$1.80

per share. The exercise price for the remaining

120,000

warrants will be the lesser of

$2.00

per share or

one hundred

and

twenty

percent (

120%

) of the market price of the Company's common stock on the vesting date of the warrant. The warrants were valued using the Black-Scholes option pricing model. Assumptions used were as follows: (i) the fair value of the underlying stock was

$0.94

for the

30,000

warrants and

$0.90

for the

120,000

warrants; (ii) the risk-free interest rate is

2.77%;

(iii) the contractual life is

years; (iv) the dividend yield of

0%;

and (v) the volatility is

64.6%.

The fair value of the warrants amounted to

$135,764

and will be amortized over the life of the warrants as a reduction of revenues. The reduction of revenues recorded for the year ended

December 31, 2020

and

2019

was

$35,943

and

$35,940,

respectively.

August 12, 2020,

the Company issued

27,051

shares of common stock to University FanCards, LLC in a cashless exercise at

$3.46

per common share in exchange for

60,000

warrants exercised by FanCards, LLC. On

February 5, 2021,

the Company issued

19,795

shares of common stock to University FanCards, LLC in a cashless exercise at

$5.88

per common share in exchange for

30,000

warrants exercised by FanCards, LLC.

December

15,

2020,

the Company issued to Information Management Solutions, LLC warrants to purchase

945,599

unregistered warrants to purchase shares of Usio, Inc. or

945,599

shares of our common stock,

$0.001

par value per share, with an exercise price of

$4.23.

The warrants were valued using the Black-Scholes option pricing model. Assumptions used were as follows: (i) the fair value of the underlying stock was

$0.58;

(ii) the risk-free interest rate is

0.09%;

(iii) the contractual life is

years; (iv) the dividend yield of

0%;

and (v) the volatility is

59.9%.

The fair value of the warrants amounted to

$552,283

and will be recorded as an increase in the customer list asset and have a term of

five

years from time of vest.