5. STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

Stockholders’ Equity

Employee Stock Purchase Plan:

The Company offers an Employee Stock Purchase Plan (the “ESPP”) that is open to all employees working more than 15 hours per week. Shares of the Company’s common stock may be purchased by employees at six-month intervals at 85% of the fair market value on the last trading day of each six-month period. Employees purchased 18,333 and 8,582 shares in 2019 and 2018, respectively. As of December 31, 2019, a total of 324,504 shares have been issued from the 350,000 shares originally authorized.

KSOP:

The Company offers a KSOP Plan (the “KSOP”) that includes the Employee Stock Ownership Plan (the “ESOP”) and the 401(k) Plan. The KSOP allows the Company to use Company stock to match contributions from its employees should it so choose. The KSOP is available to eligible employees who had completed six months of service. Beginning January 1, 2016, the matching of employee contributions were issued in Company stock. Employer contributions charged to operations for stock matching of employee contributions for the year ended December 31, 2019 and 2018 totaled $688,000 and $527,000, respectively.

Stock Repurchase Plan:

In 2007, the Company’s Board of Directors adopted a plan that authorized the repurchase of up to 250,000 shares of the Company’s common stock in open market transactions or block purchases of privately negotiated transactions. The Company repurchased 216,543 shares under the 2008 Stock Repurchase Plan and in 2012, authorized the repurchase of an additional 100,000 shares of the Company’s common stock. No shares were repurchased in 2019 or 2018, and currently the Company is authorized to repurchase up to 128,871 shares under the Stock Repurchase Plan

Stock-Based Compensation

Stock-based compensation is recorded at fair value as of the date of grant, is included in the salaries and benefits expense line item on the consolidated statements of operations and amounted to $235,000 and $346,000 for the years ended December 31, 2019 and 2018, respectively.

Stock Options:

The Company’s 1994 Stock Plan, as amended, (the “Plan”) provides for the granting of awards in the form of stock options, restricted stock, stock appreciation rights, and deferred stock to key employees and non-employees, including directors of and consultants to the Company and any subsidiary, to purchase up to a maximum of 1,650,000 shares of common stock. The Company currently has 364,928 shares available for grant under the Plan. The Plan is administered by the Board of Directors which determines the persons who are to receive awards under the Plan, the type of award to be granted, the number of shares subject to each award and, if an option, the exercise price of each option.

The Plan provides that payment of the exercise price may be made in the form of unrestricted shares of common stock already owned by the optionee. The Company calculates the fair market value of unrestricted shares as the average of the high and low sales prices on the date of the option exercise. The Company’s common stock is purchased upon the exercise of stock options, and restricted stock awards are settled in shares of the Company’s common stock.

Stock option activity related to the Plan during the years ended December 31, 2019 and 2018 is summarized below:


	2019			2018

		Weighted			Weighted
		Average			Average
	Number of	Exercise		Number of	Exercise
	Options	Price		Shares	Price
Outstanding at beginning of year	75,062	$	7.95	142,502	$	8.19
Granted	—		—	—		—
Exercised	(41,310)		6.62	(67,440)		8.45
Expired/Forfeited	(502)		6.00	—		—

Outstanding at end of year	33,250	$	9.64	75,062	$	7.95

Options exercisable at end of year	33,250	$	9.64	75,062	$	7.95

The grant-date fair value of options outstanding and exercisable at December 31, 2019 and 2018 was $148,000 and $224,000, respectively. The weighted average remaining contractual term of these options is 0.4 years.

There were no options granted in 2019 or 2018. The total fair value of options exercised during the years ended December 31, 2019 and 2018 was $75,000 and $183,000, respectively. The total intrinsic value of options exercised during 2019 and 2018 was $313,000 and $494,000, respectively.

The following table summarizes information concerning all options outstanding and options exercisable as of December 31, 2019:


		Options Outstanding						Options Exercisable
			Weighted	Weighted					Weighted
			Average	Average		Aggregate			Average		Aggregate
Range of		Number	Life (Years)	Exercise		Intrinsic		Number	Exercise		Intrinsic
Exercise Price		Outstanding	Remaining	Price		Value		Exercisable	Price		Value
$	6.00 - 8.00	—	—	$	—	$	—	—	$	—	$	—
$	8.01 - 11.00	24,250	0.2	$	8.28		99,910	24,250	$	8.28		99,910
$	11.01 - 14.00	9,000	2.1	$	13.30		—	9,000	$	13.30		—
	Total	33,250	0.9	$	9.64	$	99,910	33,250	$	9.64	$	99,910

Board of Directors Stock Option and Restricted Stock Grants

The Company’s Stock Plan was amended to authorize annual grants of restricted stock, deferred stock, stock options, or any combination of the three, to non-employee members of the Board of Directors at the time of the Company’s annual shareholders’ meeting as determined by the Board prior to each such meeting. Options granted under the Plan generally expire 10 years after the grant date. Restricted stock and deferred stock grants generally vest 100% one year after the date of the annual meeting at which they were granted, are subject to restrictions on resale for an additional year, and are subject to forfeiture if a board member terminates his or her board service prior to the shares vesting.

Below is a summary of changes in Board of Directors unvested restricted and deferred stock:


		Weighted
	Restricted/	Average
	Deferred	Fair Value
	Stock	Per Share
Non-Vested Balance, December 31, 2017	11,264	$	10.65
Granted	7,456		16.10
Vested	(11,264)		10.65
Forfeited	—		—
Non-Vested Balance, December 31, 2018	7,456	$	16.10
Granted	12,604		12.69
Vested	(7,456)		16.10
Forfeited	—		—
Non-Vested Balance, December 31, 2019	12,604	$	12.69

At December 31, 2019, there was approximately $75,000 of total unrecognized stock-based compensation expense related to unvested deferred stock awards the Company expects to recognize in 2020.

Long Term Incentive Plan and Award of Deferred Stock

In 2016, the Board of Directors of the Company approved a new plan for long-term incentive compensation of the Company’s named executive officers (NEOs) and other Senior Executives called the Canterbury Park Holding Corporation Long Term Incentive Plan (the “LTI Plan”). The LTI Plan authorizes the grant of Long Term Incentive Awards that provide an opportunity to NEOs and other Senior Executives to receive a payment in cash or shares of the Company’s common stock to the extent of achievement at the end of a period greater than one year (the “Performance Period”) as compared to Performance Goals established at the beginning of the Performance Period. The Company uses three years as the Performance Period. The LTI is a sub-plan of the Company’s Stock Plan which authorizes the grant of Deferred Stock awards that represent the right to receive Company common stock if conditions specified in the awards are satisfied.

The Board has approved granting opportunities in 2017, 2018, and 2019 to Company officers and key employees to earn long-term incentive compensation under the LTI Plan. Each officer and key employee was granted an Incentive Award (that was also a Deferred Stock Award under the Stock Plan) which provided an opportunity to receive a payout of shares of the Company’s common stock to the extent of achievement compared to Performance Goals at the end of the three year Performance Period. The Company expects to pay out 24,681 shares of deferred stock in the 2020 first quarter, related to the Performance Period ended December 31, 2019. The number of shares to be paid out for the Performance Period ending December 31, 2020 and 2021 will be determined based on actual achievement compared to Performance Goals. Compensation expense related to the LTI plan for 2019 and 2018 was $100,000 and $216,000, respectively.