Note 8 – Share-Based Compensation

Effective January 1, 2017, the Company adopted the 2017 Long Term Incentive Plan (the “Plan”) to attract and retain certain employees. The Plan initially provided for the issuance of up to one million (1,000,000) common stock equivalents subject to the terms and conditions of the Plan. The Plan was amended on June 13, 2018 to increase the number of shares available under the Plan to 1,250,000 shares. The Plan generally provides for quarterly and bi-annual vesting over terms ranging from two to three years. The Company accounts for the Plan as an equity plan.

The Company recognized these stock options at fair value determined by applying the Black Scholes options pricing model to the grant date market value of the underlying common shares of the Company.

The compensation expense associated with these stock options is amortized on a straight-line basis over their respective vesting periods. For the three months ended September 30, 2019 and 2018, the Company recognized $236,351 and $218,599, respectively, and for the nine months ended September 30, 2019 and 2018, the Company recognized $677,295 and $661,799, respectively, of non-cash share-based compensation expense relating to stock options in selling, general and administrative expenses in the condensed consolidated statements of operations.

Stock options activity as of September 30, 2019 is as follows:


	As of September 30, 2019			Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number of	Exercise		Contract	Intrinsic
	Stock Options	Price		Term (Yrs.)	Value
Total outstanding at December 31, 2018	662,500	$	7.52	3.34	$	332,100
Granted	490,000		8.30	4.40		—
Forfeited	(103,334)		9.66	3.72		—
Exercised	(16,666)		9.61	3.24		—
Expired	—		—	—		—

Outstanding at September 30, 2019	1,032,500	$	7.73	3.60	$	1,987,425

Vested and exercisable at September 30, 2019	629,170	$	7.29	2.77	$	1,484,753

As of September 30, 2019 the Company had unrecognized pre-tax compensation expense of $1,660,378 related to non-vested stock options under the Plan of which $230,277, $788,468, $582,347 and $59,286 will be recognized in 2019, 2020, 2021 and 2022, respectively.

We used the following weighted average assumptions to estimate the fair value of stock options granted for the periods presented as follows:


	Nine Months Ended September 30,
Weighted Average Assumptions:	2019			2018
Expected dividend yield		0.0	%		0.0	%
Expected equity volatility		56.1	%		57.1	%
Expected term (years)		5			5
Risk-free interest rate		2.22	%		2.10	%
Exercise price per stock option	$	7.73		$	7.52
Market price per share	$	7.27		$	6.46
Weighted average fair value per stock option	$	3.51		$	3.10

The risk-free rates are based on the implied yield available on US Treasury constant maturities with remaining terms equivalent to the respective expected terms of the options.

The Company estimates expected terms for stock options awarded to employees using the simplified method in accordance with ASC 718, Stock Compensation, because the Company does not have sufficient relevant information to develop reasonable expectations about future exercise patterns. The Company estimates the expected term for stock options using the contractual term. Expected volatility is calculated based on the Company’s peer group because the Company does not have sufficient historical data and will continue to use peer group volatility information until historical volatility of the Company is available to measure expected volatility for future grants.

The Company also awards common stock grants to directors, employees and non-employee executive producers that provide services to the Company. For the three months ended September 30, 2019 and 2018, the Company recognized non-cash share-based compensation expense relating to director stock grants of $25,000, respectively, and for the nine months ended September 30, 2019 and 2018, the Company recognized $75,000, respectively. For the three and nine months ended September 30, 2019, the Company recognized non-cash share-based compensation expense relating to employee stock grants of $41,854, respectively.