NOTE 7 – STOCK-BASED COMPENSATION

The TechPrecision Corporation 2016 Equity Incentive Plan, or the 2016 Plan, authorizes the award of incentive and non-qualified stock options, restricted stock awards, restricted stock units, and performance awards to employees, directors, consultants, and other individuals who provide services to TechPrecision or its affiliates. The purpose of the 2016 Plan is to: (a) enable TechPrecision and its affiliated companies to recruit and retain highly qualified employees, directors and consultants; (b) provide those employees, directors and consultants with an incentive for productivity; and (c) provide those employees, directors and consultants with an opportunity to share in the growth and value of the Company. Subject to adjustment as provided in the 2016 Plan, the maximum number of shares of common stock that may be issued with respect to awards under the 2016 Plan is 5,000,000 shares (inclusive of awards issued under the 2006 Long-Term Incentive Plan, or the 2006 Plan, that remained outstanding as of the effective date of the 2016 Plan). Shares of our common stock subject to awards that expire unexercised or are otherwise forfeited shall again be available for awards under the 2016 Plan.

The fair value of the options we grant is estimated using the Black-Scholes option-pricing model based on the closing stock prices at the grant date and the weighted average assumptions specific to the underlying options. Expected volatility assumptions are based on the historical volatility of our common stock. The average dividend yield over the historical period for which volatility is computed is zero. The risk-free interest rate is selected based upon yields of U.S. Treasury issues. We used the simplified method for all grants to estimate the expected life of the option. We assume that stock options will be exercised evenly over the period from vesting until the awards expire. We account for award forfeitures as they occur. As such, the assumed period for each vesting tranche is computed separately and then averaged together to determine the expected term for the award. At September 30, 2019, there were 1,572,000 shares available for grant under the 2016 Plan.

The following table summarizes information about options for the most recently completed periods:


						Weighted
						Average
		Weighted		Aggregate		Remaining
	Number Of	Average		Intrinsic		Contractual Life
	Options	Exercise Price		Value		(in years)
Outstanding at 3/31/2018	3,394,668	$	0.417	$	698,200	6.72
Granted	150,000	$	0.800
Exercised	(365,000)	$	0.271
Canceled	(241,668)	$	1.226
Outstanding at 3/31/2019	2,938,000	$	0.416	$	1,869,200	6.74
Exercised	(20,000)	$	0.360
Outstanding at 9/30/2019	2,918,000	$	0.416	$	3,505,600	6.45
Vested or expected to vest at 9/30/2019	2,918,000	$	0.416	$	3,505,600	6.45
Exercisable and vested at 9/30/2019	2,918,000	$	0.416	$	3,505,600	6.45

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the closing stock price on the last trading day of the first quarter of fiscal 2020 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 September 30, 2019. This amount changes based on the fair market value of the Company’s common stock. All of the options are vested and exercisable and the maximum contractual term is ten years for option grants.

On April 5, 2019, the Company issued 20,000 shares of the Company’s common stock, par value $0.0001 per share, pursuant to an option award exercised on March 20, 2019, granted previously under the Company’s 2016 Long-Term Incentive Plan. At September 30, 2019, there was no remaining unrecognized compensation cost related to stock options. Other information relating to stock options outstanding at September 30, 2019 is as follows:


		Weighted
		Average
		Remaining	Weighted			Weighted
	Options	Contractual	Average		Options	Average
Range of Exercise Prices:	Outstanding	Term	Exercise Price		Exercisable	Exercise Price
$0.01‑$1.00	2,820,000	6.84	$	0.37	2,820,000	$	0.37
$1.01‑$1.96	98,000	1.43	$	1.84	98,000	$	1.84
Totals	2,918,000				2,918,000

Restricted Stock Awards

On December 7, 2018 we granted a total of 100,000 shares of restricted stock under the 2016 Plan to the board of directors and a total of 25,000 shares of restricted stock to our executive officers. The stock-based compensation expense of $122,500 for service-based restricted stock was measured at fair value on the date of grant based on the number of shares expected to vest and the quoted market price of the Company’s common stock. The shares of restricted stock fully vest and cease to be subject to forfeiture on December 7, 2019, one year following the grant date. Each grantee must be serving as a director or executive officer on the vesting date and must have been continuously serving in such capacity from the grant date through the vesting date for the shares of restricted stock to vest. Prior to the vesting date, the grantee is not permitted to sell, transfer, pledge, assign or otherwise encumber the shares of restricted stock and if the grantee’s service with the Company terminates prior to the vesting date, the grantee’s restricted stock will be forfeited automatically. The aggregate fair value of the restricted stock expensed during the six months ended September 30, 2019 was $61,250. At September 30, 2019 there was $20,417 of total unrecognized compensation cost related to the restricted stock awards.