Note 3. Stock-based Compensation

The Company recognizes compensation expense for stock options in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 718, “Stock Based Compensation”. The expense of the option is generally measured at fair value at the grant date with compensation expense recognized over the service period, which is typically the vesting period. For grants subject to a service condition, the Company utilizes the Black-Scholes option-pricing model to estimate the fair value of each option on the date of grant. The Black-Scholes model takes into consideration the exercise price and expected life of the options, the current price of the underlying stock and its expected volatility, the expected dividends on the stock and the current risk-free interest rate for the expected life of the option. The Company’s estimate of the fair value of a stock option is based on expectations derived from historical experience and may not necessarily equate to its market value when fully vested. In accordance with ASC 718, the Company estimates the number of options for which the requisite service is expected to be rendered. At September 30, 2018, the Company had three active stock-based compensation plans. The 2018 equity compensation plan was approved at the annual meeting in May 2018 and is described in the proxy statement for that meeting filed by the Company with the SEC. The other plans are described in the Company’s 2017 Form 10-K Report.

The Company did not grant stock options during the nine month periods ended September 30, 2018 and September 30, 2017. There were 23,125 common stock options exercised in the nine month period ended September 30, 2018, and 28,500 common stock options were exercised during the nine month period ended September 30, 2017.

A summary of the status of the Company’s stock options is presented below.



			Weighted average
			remaining
		Weighted average	contractual	Aggregate
	Shares	exercise price	term (years)	intrinsic value
Outstanding at January 1, 2018	1,452,625	$ 8.30	4.64	$ -
Granted	-	-	-	-
Exercised	(23,125)	9.45	-	-
Expired	-	-	-	-
Forfeited	-	-	-	-
Outstanding at September 30, 2018	1,429,500	$ 8.28	3.90	$ 2,054,930
Exercisable at September 30, 2018	1,268,250	$ 8.45	3.43	$ 1,628,930

The Company granted 507,792 restricted stock units (RSUs) in the first nine months of 2018 of which 440,292 have a vesting period of 2.8 years and 67,500 have a vesting period of one year. At issuance, the 507,792 RSUs granted in the first nine months of 2018 had a fair value of $11.07 per unit. In the first nine months of 2017, the Company granted 955,024 RSUs of which 820,024 had a vesting period of three years and 135,000 had a vesting period of one year. Of the RSUs granted in the first nine months of 2017, 799,599 had a fair value of $5.06 per unit, 7,923 had a fair value of $6.31 per unit and 147,542 had a fair value of $7.65 per unit at issuance.

A summary of the status of the Company’s RSUs is presented below.



		Weighted average	Average remaining
		grant date	contractual
	Shares	fair value	term (years)
Outstanding at January 1, 2018	1,264,454	$ 5.49	1.67
Granted	507,792	11.07
Vested	(571,548)	5.43
Forfeited	(9,803)	7.65
Outstanding at September 30, 2018	1,190,895	$ 7.88	1.58

As of September 30, 2018, there was a total of $7.5 million of unrecognized compensation cost related to unvested awards under share-based plans. This cost is expected to be recognized over a weighted average period of approximately 1.6 years. Related compensation expense for the nine months ended September 30, 2018 and 2017 was $3.0 million and $2.4 million, respectively. The total issuance date fair value of RSUs vested and options exercised during the nine months ended September 30, 2018 and 2017 was $3.1 million and $2.6 million, respectively.