NOTE 11 - SHARE-BASED COMPENSATION

12 Months Ended

Dec. 31, 2018

Share-based Compensation [Abstract]

SHARE-BASED COMPENSATION

For share-based awards granted, we have recognized compensation expense based on the estimated grant date fair value method.  For these awards we have recognized compensation expense using a straight-line amortization method and reduced for estimated forfeitures.  The impact on our results of operations of recording share-based compensation for the year ended December 31, 2018 and 2017 was as follows:

	Year Ended December  31,
	2018	2017
(in thousands)
Cost of goods sold	$25	$18
Research and development	266	164
Selling, general and administrative	939	532
Total share-based compensation	$1,230	$714

An immaterial amount of share-based compensation was capitalized into inventory as overhead for the years ended December 31, 2018 and 2017, respectively.

The fair values of share-based awards for employee stock option awards were estimated at the date of grant using the Black-Scholes valuation model.  The volatility and expected life of the options used in calculating the fair value of share-based awards may exclude certain periods of historical data that we considered atypical and not likely to occur in future periods.  The following weighted average assumptions were used to calculate the fair value of options granted during the years ended December 31:

	Employee Stock
	Options
	2018	2017
Risk-free interest rates	N/A	1.72%
Volatility factors	N/A	62.00%
Expected life of the option in years	N/A	4.0
Expected dividend yield	N/A	None

The risk-free interest rate used in the Black-Scholes valuation method is based on the implied yield currently available in U.S. Treasury securities at maturity with an equivalent term.  We have not recently declared or paid any dividends and do not currently have plans to do so in the future.  The expected term of options represents the period that our stock-based awards are expected to be outstanding and has been determined based on historical weighted average holding periods and projected holding periods for the remaining unexercised shares.  Consideration was given to the contractual terms of our stock-based awards, vesting schedules and expectations of future employee behavior.  Expected volatility is based on the annualized daily historical volatility of our stock over a representative period.

The following table summarizes stock option activity under our stock option plans for the twelve months ended December 31:

	2018			2017
	Options	Weighted-Average Exercise Price	Weighted-Average Remaining Contractual Life in Years	Options	Weighted-Average Exercise Price	Weighted-Average Remaining Contractual Life in Years
Outstanding at beginning of year	40,000	$6.10		376,000	$2.95
Granted	-	-		25,000	8.03
Exercised	(15,000)	2.83		(346,000)	2.83
Cancelled, Expired or
Forfeited	-	-		(15,000)	6.01
Outstanding at end of year	25,000	$8.03	4.50	40,000	$6.10	3.60
Vested or expected to vest at the end of the period	22,924	$8.03	4.50	34,460	$5.79	3.29
Exercisable at end of year	7,813	$8.03	4.50	16,563	$3.37	0.91

The aggregate intrinsic value of outstanding options is $0.  The aggregate intrinsic value of awards exercised during the twelve month period ended December 31, 2018 was $87,900.

Restricted stock award including performance-based stock award activity under our share-based compensation plan was as follows:

	2018		2017
	Awards	Weighted - Average Grant Date Fair Value	Awards	Weighted - Average Grant Date Fair Value
Outstanding at beginning of year	565,850	$5.09	464,850	$2.78
Granted	206,856	7.11	287,600	7.29
Vested	(213,100)	4.51	(181,725)	2.72
Cancelled	(750)	4.24	(4,875)	3.06
Outstanding at end of year	558,856	$6.06	565,850	$5.09

During the year ended December 31, 2018, 67,322 shares were withheld from issuance related to restricted stock units vesting and stock option exercises to cover employee taxes and stock options exercise price.

The remaining unamortized expected future compensation expense and remaining amortization period associated with unvested option grants and restricted stock awards are:

	December 31, 2018	December 31, 2017
Unamortized future compensation expense	$2,835,978	$2,560,844
Remaining weighted average amortization period in years	2.63	2.98