10. STOCK-BASED COMPENSATION

2015 Equity Incentive Plan. The 2015 Equity Incentive Plan (“2015 Plan”), as approved by stockholders and further amended in the second quarter of 2017, allows for the issuance of up to 2,500,000 shares of common stock. The 2015 Plan allows for stock-based awards to be granted to directors, employees and consultants and allows for a variety of forms of awards, including stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents and performance-based compensation. Stock option awards have maximum 10‑year terms and all awards issued under the 2015 Plan do not vest on an accelerated basis if there is a change in control of the Company, unless the awards are not assumed by the successor, as defined.

In June 2020, the Company issued options to purchase a total of 330,000 additional shares of common stock under the 2015 Plan to various other employees of the Company, all of which have an exercise price of $1.73. In September 2020, the Company issued options to purchase a total of 10,000 additional shares of common stock under the 2015 Plan to various other employees of the Company, all of which have an exercise price of $1.96. All of these stock options vest annually in equal amounts over the next three years. In all cases, the exercise price of the options reflects the Company’s closing price on the date of grant.

In June 2020, the Company issued to non-executive members of its Board of Directors, as compensation for their annual service, options to purchase a total of 32,000 shares of common stock under the 2015 Plan with an exercise price of $1.73 and a one-year vesting period, and 13,872 shares of common stock under the 2015 Plan that vested immediately with certain transfer restrictions.

In July 2020, the Company elected two new non-executive members to its Board of Directors and, as compensation for their annual service, issued options to them to purchase a total of 16,000 shares of common stock under the 2015 Plan with an exercise price of $1.51 and a one-year vesting period, and 15,894 shares of common stock under the 2015 Plan that vested immediately with certain transfer restrictions. Similarly, in December 2020, the Company elected one new non-executive member to its Board of Directors and, as compensation for his annual service, issued options to purchase a total of 2,000 shares of common stock under the 2015 Plan with an exercise price of $3.73 and a one-year vesting period, and 1,675 shares of common stock under the 2015 Plan that vested immediately with certain transfer restrictions.

As of December 31, 2020, the Company had 102,002 stock-based awards authorized by stockholders and available for grant from the 2015 Plan.

Subsequent to the end of 2020, the Company issued additional stock-based awards. In December 2020, the Company extended the employment agreement of Daniel R. Lee, the Company’s President and Chief Executive Officer, through December 2025. As a part of such agreement, on January 7, 2021, the Company issued Mr. Lee 69,975 performance-based shares, with the vesting of such shares based on the compounded annual growth rate of the Company’s Adjusted EBITDA and Free Cash Flow Per Share, as defined in his employment agreement, for the three-year periods ending December 31, 2021, December 31, 2022, and December 31, 2023. For the 2021 period, one-sixth of Mr. Lee’s performance-based shares will vest if the Company’s annual Adjusted EBITDA for 2021 reflects at least 10% per annum growth since 2018, and one-sixth of Mr. Lee’s performance-based shares will vest if the Company’s annual Free Cash Flow Per Share for 2021 reflects at least 12% per annum growth since 2018. Vesting of the performance-based shares is similar for the 2022 and 2023 periods. Additionally, Mr. Lee received an option to purchase 124,120 shares of common stock under the 2015 Plan with an exercise price of $3.93, of which 92,093 shares are conditioned upon stockholders increasing the number of shares available for issuance under the 2015 Plan or a successor plan. Mr. Lee’s option will vest annually in equal amounts over the next three years. The exercise price of the options reflects the Company’s closing price on the date of grant. 

Stock Options. The following table summarizes information related to the Company’s common stock options:

 

Compensation Cost. Compensation expense for the years ended December 31, 2020 and 2019 was $0.4 million and $0.3 million, respectively. These costs are recognized on a straight-line basis over the vesting period of the awards net of forfeitures and are included in selling, general and administrative expense on the consolidated statements of operations.

As of December 31, 2020, there was approximately $0.5 million of unrecognized compensation cost related to unvested stock options granted by the Company. This unrecognized compensation cost is expected to be recognized over a weighted-average period of 1.9 years.

The Company estimated the fair value of each stock option award on the grant date using the Black-Scholes valuation model. Option valuation models require the input of highly subjective assumptions, and changes in assumptions used can materially affect the fair value estimate. Option valuation weighted-average assumptions were as follows:

 

The weighted-average grant date fair value of options granted during the years ended December 31, 2020 and 2019 was $0.95 and $0.94 per share, respectively.

Expected volatility is based on the historical volatility of our stock price. Dividend yield is based on the estimate of annual dividends expected to be paid at the time of the grant. The expected term considers the contractual term of the option as well as historical exercise and forfeiture behavior. The risk-free interest rate is based on the rates in effect on the grant date for U.S. Treasury instruments with maturities matching the relevant expected term of the award.