Note 4 – Transactions Affecting Stockholders’ Equity

Our authorized capital stock consists of 50 million shares of common stock, $0.0005 par value, and one million shares of preferred stock, $0.0005 par value.

Preferred Stock

The preferred stock authorized under our certificate of incorporation may be issued from time to time in one or more series. As of June 30, 2020 and December 31, 2019, no shares of preferred stock have been issued.

Common Stock Dividend

On December 24, 2018, the Board declared a special cash dividend of $0.25 per share on the Company’s common stock resulting in $2.9 million payable on January 24, 2019 to holders of record of the Company’s common stock on January 10, 2019. On January 24, 2019, the Company paid an aggregate of $2.9 million to the Company’s stockholders entitled to receive such dividend.

The 2010 Directors’ Equity Compensation Plan

On May 5, 2010, our stockholders approved the 2010 Directors’ Equity Compensation Plan, which has been subsequently amended and restated by our stockholders (the “2010 Directors’ Plan”). A primary purpose of the 2010 Directors’ Plan is to provide us with the ability to pay all or a portion of the fees of directors in stock instead of cash. The 2010 Directors’ Plan provides that the total number of shares of common stock that may be issued under the 2010 Directors’ Plan is equal to 675,000 shares.

During the three and six months ended June 30, 2020, 9,709 and 18,055 shares of common stock, respectively were granted to our directors under the 2010 Directors’ Plan. We recorded $34,875 of director fees during the six months ended June 30, 2020 in connection with these grants, which represented the fair value of the shares calculated based on the average closing price of the Company’s shares of common stock for the last five trading days of the quarter in which the Board fee was earned.

During the three and six months ended June 30, 2019, 6,571 and 10,737 shares of common stock, respectively were granted to our directors under the 2010 Directors’ Plan. We recorded $33,750 of director fees during the six months ended June 30, 2019 in connection with these grants, which represented the fair value of the shares calculated based on the average closing price of the Company’s shares of common stock for the last five trading days of the quarter in which the Board fee was earned.

At June 30, 2020, there were 340,731 shares of common stock that may be issued pursuant to the terms of the 2010 Directors’ Plan.

The 2010 Equity Compensation Plan

On May 5, 2010, our stockholders approved the 2010 Equity Compensation Plan, which was subsequently amended and restated by our stockholders (the “2010 Plan”). The 2010 Plan provides that the total number of shares of common stock that may be issued under the 2010 Plan is 3.9 million shares.

No options were granted under the 2010 Plan for the three and six months ended June 30, 2020 and 2019. In addition, no stock options were exercised during the three and six months ended June 30, 2020 and 2019.

As of June 30, 2020, there were 782,000 options outstanding and 528,659 options available to be issued pursuant to the terms of the 2010 Plan. We will recognize approximately $300,000 of share-based compensation expense over a weighted average period of 1.6 years.

The 2018 Stock Incentive Plan

On April 12, 2018, our stockholders approved the 2018 Stock Incentive Plan (the “2018 Stock Plan”). At April 12, 2018, all 2.3 million shares available for issuance under the 2018 Stock Plan have been granted in the form of stock options at an initial exercise price of $3.00 per share, which is exercisable in 36 monthly installments to Ted Karkus (the “CEO Option”), our Chief Executive Officer and no stock options have been exercised under the 2018 Stock Plan.

The 2018 Plan requires certain proportionate adjustments to be made to the stock options granted under the 2018 Stock Plan upon the occurrence of certain events, including a special distribution (whether in the form of cash, shares, other securities, or other property) in order to maintain parity. Accordingly, the Compensation Committee of the board of directors, as required by the terms of the 2018 Stock Plan, adjusted the terms of the CEO Option, such that the exercise price of the CEO Option was reduced from $3.00 per share to $2.00 per share, effective as of September 5, 2018, the date the special $1.00 special cash dividend was paid to the Company’s stockholders. The exercise price of the CEO Option was further reduced from $2.00 to $1.75 per share, effective as of January 24, 2019, the date the $0.25 special cash dividend was paid to the Company’s stockholders. The exercise price of the CEO Option was further reduced from $1.75 to $1.50 per share, effective as of December 12, 2019, the date another $0.25 special cash dividend was paid to Company’s stockholders. We will recognize approximately $318,000 of share-based compensation expense over a weighted average period of 0.7 years.

The following table summarizes stock options activity during the three months ended June 30, 2020 for both the 2010 Plan and 2018 Stock Plan (in thousands, except per share data):