Stockholders’ Equity

Stock Options – Incentive Stock Plans

The Company sponsors an incentive stock plan (the

“2014

Plan”) allowing for a maximum of

142,857

shares to be granted in the form of either incentive stock options, non-qualified stock options, restricted stock awards, or unrestricted stock awards. Employees, directors, advisors, and consultants of the Company are eligible to receive the grants. This plan has been approved by the stockholders of the Company. The Compensation Committee of the Board of Directors administers the plan.

The

2014

Plan provides that options

may

be issued under the Plan at an option price

not

less than fair market value of the stock at the time the option is granted. Under the plan, restricted stock of the Company

may

be granted at

cost to the grantee. The grantees are entitled to dividends and voting rights for their respective shares. Restrictions limit the sale or transfer of these shares during the requisite service period. In addition, the committee

may

grant or sell unrestricted stock at a purchase price to be determined by the committee. Vesting terms and restrictions, if applicable, under the plan, are set by the committee and will be

years or less. The

2014

Plan expires in

2024.

May 2017,

the Company’s shareholders voted to approve a

2017

Incentive Stock Plan (

2017

Plan) which authorizes the issuance of up to

200,000

shares of the Company’s common stock in various forms of stock options and/or stock awards. The

2017

Plan will

not

become effective until registered with the Securities and Exchange Commission.

A summary of the Company’s stock option activity and related information for the years ended

December 31

follows:

	2018					2017
	Options			Weighted Avg. Exercise Price		Options			Weighted Avg. Exercise Price
Outstanding beginning of the year		140,424		$	7.85		236,844		$	$8.14
Granted		-					-
Exercised		-					-
Expired and forfeited		(58,998	)		7.96		(96,420	)		8.57
Outstanding at end of year		81,426		$	7.77		140,424		$	7.85

Exercisable at end of year		14,655		$	7.77		13,713		$	7.77

Compensation cost for the stock option plan was approximately

$21,000

(

$21,000

net of tax) and

$27,000

(

$27,000

net of tax) for the years ended

December 31, 2018

and

2017,

respectively, and has been recorded in selling, general, and administrative expense. As of

December 31, 2018,

the total remaining unrecognized compensation cost related to the non-vested portion of time vesting stock options totaled

$19,000

(

$19,000

net of tax), which will be amortized over the weighted remaining requisite service period of

1.17

years. The aggregate intrinsic value of stock options outstanding and currently exercisable at

December 31, 2018

was $-

Distributor Stock Purchase Plan

July 2009,

the Company established a Distributor Stock Purchase Plan (

2009

Plan) which replaced a similar plan which had expired.

The plan allows distributors who have reached the “Ambassador” status the opportunity to allocate up to

10%

of their monthly compensation into the plan to be used to purchase the Company’s common stock at the current market value. The plan also states that at the end of each year, the Company will grant warrants to purchase additional shares of the Company’s common stock based on the number of shares purchased by the distributors under the plan during the year. The warrant exercise price will equal the market price for the Company’s common stock at the date of issuance. The warrants issued shall be in the amount of

25%

of the total shares purchased under the plan during the year and the warrants are fully vested upon grant.

The Company records expense under the fair value method for warrants granted to distributors. Total expense for the warrants was

$3,000

and

$6,600

2018

and

2017,

respectively.

A summary of the Company’s warrant activity for the years ended

December 31

follows:

	2018					2017
	Warrants			Weighted Avg. Exercise Price		Warrants			Weighted Avg. Exercise Price

Outstanding beginning of the year		5,960		$	4.46		6,291		$	5.34
Granted		1,113			4.24		1,258			4.77
Exercised		-					-
Expired		(2,183	)		4.06		(1,589	)		8.19
Outstanding at end of year		4,890		$	4.58		5,960		$	4.46

Exercisable at end of year		4,890					5,960

			As of December 31, 2018
			Warrants Outstanding and Exercisable
Range of Exercise Prices			Warrants		Weighted Avg. Exercise Price		Weighted Avg. Remaining Life
	$4.24			1,113	$	4.24		3.00
	$4.64			2,519		4.64		1.00
	$4.77			1,258		4.77		2.00
$4.24	-	$4.77		4,890	$	4.58		1.71

The fair value of the warrants was estimated at the date of grant using a Black-Scholes option pricing model with the following assumptions:

	Year ended December 31
	2018			2017

Expected warrant life (years)		3.0			3.0
Risk-free weighted average interest rate		2.46	%		1.98	%
Stock price volatility		55.8	%		73.8	%
Dividend yield		0.0	%		0.0	%

The intrinsic value for stock warrants outstanding at

December 31, 2018

was $-

The

2009

Distributor Stock Purchase Plan was established with a

ten

-year life. As a result, there will be

further grants from this Plan. Upon exercise, forfeiture or expiration of all outstanding warrants, the Plan will terminate.