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| Capital Transactions | Capital Transactions Share-Based Compensation
During the year ended December 31, 2012, our shareholders adopted and approved the Nature’s Sunshine Products, Inc. 2012 Stock Incentive Plan (the “2012 Incentive Plan”). The 2012 Incentive Plan provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, performance awards, stock awards and other stock-based awards. The Compensation Committee of the Board of Directors has authority and discretion to determine the type of award, as well as the amount, terms and conditions of each award under the 2012 Incentive Plan, subject to the limitations of the 2012 Incentive Plan. A total of 1,500,000 shares of our common stock were originally authorized for the granting of awards under the 2012 Incentive Plan. In 2015, our shareholders approved an amendment to the 2012 Incentive Plan, to increase the number of shares of Common Stock reserved for issuance by 1,500,000 shares. The number of shares available for awards, as well as the terms of outstanding awards, are subject to adjustment as provided in the 2012 Incentive Plan for stock splits, stock dividends, recapitalizations and other similar events.
We also maintain a stock incentive plan, which was approved by shareholders in 2009 (the “2009 Incentive Plan”). The 2009 Incentive Plan also provided for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, performance awards, stock awards and other stock-based awards. Under the 2012 Incentive Plan, any shares subject to award, or awards forfeited or reacquired by the Company issued under the 2009 Incentive Plan are available for award up to a maximum of 400,000 shares.
Stock Options
Our outstanding stock options include time-based stock options, which vest over differing periods of time ranging from the date of issuance to up to 48 months from the option grant date, and performance-based stock options, which have already vested upon achieving operating income margins of six, eight and ten percent as reported in four of five consecutive quarters over the term of the options.
Stock option activity for the nine-month period ended September 30, 2019, is as follows (amounts in thousands, except per share information):
During the nine months ended September 30, 2019, we granted options to purchase 25,000 shares of common stock under the 2012 Stock Incentive Plan to one member of our Board of Directors. These options were issued with an exercise price of $8.72 per share and a grant date fair value of $3.44 per share, with an expected life of five years, risk-free interest rate of 1.5 percent, and expected volatility of 43.2 percent.
Share-based compensation expense from time-based stock options for the three-month periods ended September 30, 2019 and 2018, was approximately $0.1 million and $0.1 million, respectively. Share-based compensation expense from time-based stock options for the nine-month periods ended September 30, 2019 and 2018, was approximately $0.1 million and $0.2 million, respectively. As of September 30, 2019 and December 31, 2018, there was no unrecognized share-based compensation expense related to the grants described above.
At September 30, 2019, the aggregate intrinsic value of outstanding and exercisable stock options to purchase 319,000 shares of common stock was $0.1 million. At December 31, 2018, the aggregate intrinsic value of outstanding and exercisable options to purchase 1,114,000 shares of common stock was $0.2 million.
For the nine-month periods ended September 30, 2019 and 2018, we issued 27,000 and 99,000 shares of common stock upon the exercise of stock options at an average exercise price of $2.35 and $6.10 per share, respectively. The aggregate intrinsic value of options exercised during the nine-month periods ended September 30, 2019 and 2018, was $0.2 million and $0.4 million, respectively. For the nine-month periods ended September 30, 2019 and 2018, the Company recognized $0.1 million and $0.1 million of tax benefits from the exercise of stock options, respectively.
As of September 30, 2019 and December 31, 2018, we did not have any unvested performance-based stock options outstanding.
Restricted Stock Units
Our outstanding restricted stock units (“RSUs”), include time-based RSUs, which vest over differing periods of time ranging from 12 months to up to 36 months from the RSU grant date, as well as performance-based RSUs, which vest upon achieving targets relating to growth, earnings-per-share, and/or stock price levels. RSUs granted to members of the Board of Directors contain a restriction period in which the shares are not issued until two years after vesting. At September 30, 2019 and December 31, 2018, there were 81,000 and 80,000 vested RSUs, respectively, granted to the Board of Directors with a restriction period.
Restricted stock unit activity for the nine-month period ended September 30, 2019, is as follows (amounts in thousands, except per share information):
During the nine-month period ended September 30, 2019, we granted 333,000 RSUs under the 2012 Incentive Plan to the Board of Directors, executive officers and other employees, which were comprised of both time-based RSUs and share-priced performance-based RSUs. The time-based RSUs were issued with a weighted-average grant date fair value of $8.59 per share and vest in annual installments over a -year period from the grant date or according to the restrictions for the Board of Directors noted above. The share-priced performance-based RSUs were issued with a weighted-average grant date fair value of $4.38 per share and vest upon achieving share-priced targets over a -year period from the grant date.
Except for share-priced performance RSUs, RSUs are valued at market value on the date of grant, which is the grant date share price discounted for expected dividend payments during the vesting period. For RSUs with post-vesting restrictions, a Finnerty Model was utilized to calculate a valuation discount from the market value of common shares reflecting the restriction embedded in the RSUs preventing the sale of the underlying shares over a certain period of time. Using assumptions previously determined for the application of the option pricing model at the valuation date, the Finnerty Model discount for lack of marketability is approximately 13.4 percent for a common share.
Share-price performance-based RSUs were estimated using the Monte Carlo simulation model. The Monte Carlo simulation model utilizes multiple input variables to estimate the probability that market conditions will be achieved. Our assumptions include a performance period of three years, expected volatility of 50 percent, and a range of risk-free rates between 2.1 percent and 2.9 percent.
Share-based compensation expense for RSUs for the three-month periods ended September 30, 2019 and 2018, was approximately $0.5 million and $0.3 million, respectively. Share-based compensation expense from RSUs for the nine-month periods ended September 30, 2019 and 2018, was approximately $1.1 million and $1.3 million, respectively. As of September 30, 2019 and December 31, 2018, the unrecognized share-based compensation expense related to the grants described above, excluding incentive awards discussed below, was $1.5 million and $1.8 million, respectively. The remaining compensation expense is expected to be recognized over the weighted average period of approximately 0.9 years.
Share-based compensation expense related to performance-based RSUs for the three-month periods ended September 30, 2019 and 2018, was $0.1 million and $0, respectively. Share-based compensation expense related to performance-based RSUs for the nine-month periods ended September 30, 2019 and 2018, was $0.4 million and $0, respectively. Should we attain all of the metrics related to performance-based RSU grants, we would recognize up to $1.9 million of potential share-based compensation expense. We currently expect to recognize an additional $0.9 million of that potential share-based compensation expense.
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