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STOCK-BASED COMPENSATION | 9 Months Ended
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Sep. 30, 2023
Share-Based Payment Arrangement [Abstract] |
STOCK-BASED COMPENSATION | NOTE 11 - STOCK-BASED COMPENSATION During the first fiscal quarter of 2023, the Company granted 75 shares of restricted stock to certain executives, which vest in four equal installments over a four-year period, provided that the executive is employed by the Company on each scheduled vesting date. During the first fiscal quarter of 2023, the Company granted options to purchase 405 shares of the Company’s common stock to certain executives, consisting of options to purchase 130 shares of common stock with time-based vesting conditions and options to purchase 275 shares of common stock with performance-based vesting conditions (which we refer to as “market-based stock options”). The options have an exercise price of $3.00. The market-based stock options will vest and become exercisable if the volume weighted average price of the Company’s common stock during a consecutive 60-day trading period (the “60 Day VWAP”) reaches $12.00. The Company valued the market-based stock option awards using a Monte Carlo simulation model using a daily price forecast over ten years until expiration utilizing Geometric Brownian Motion that considers a variety of factors including, but not limited to, the Company’s common stock price, risk-free rate (3.7%), and expected stock price volatility (50%) over the expected life of awards (5.1 years). The weighted average fair value of market-based stock options granted during the period was $1.38. During the second fiscal quarter of 2023, the Company issued 162 shares of restricted stock to certain employees, which vests over four equal installments over a four-year period, provided that the employee is employed by the Company on each scheduled vesting date. During the second fiscal quarter of 2023, the Company issued options to purchase 930 shares of the Company’s common stock to certain employees, consisting of options to purchase 340 shares of common stock with time-based vesting conditions and options to purchase 590 shares of common stock with performance-based vesting conditions (which we refer to as “market-based stock options”). The options have an exercise price of $3.13. The market-based stock options will vest and become exercisable if the 60 Day VWAP reaches $12.00. The Company valued the market-based stock option awards using a Monte Carlo simulation model using a daily price forecast over ten years until expiration utilizing Geometric Brownian Motion that considers a variety of factors including, but not limited to, the Company’s common stock price, risk-free rate (3.7%), and expected stock price volatility (50%) over the expected life of awards (5.1 years). The weighted average fair value of market-based stock options issued during the period was $1.56. During the third fiscal quarter of 2023, the Company granted 900 shares of restricted stock to Steve Towe, the Company’s Chief Executive Officer, which vest over four equal installments over a four-year period, provided that the Mr. Towe is employed by the Company on each scheduled vesting date. Additionally, 82 shares of restricted stock were granted to certain members of the board of directors, which vest in full on the date of grant, provided that the director is a director of the Company on such date. [A] Stock Options: The following table summarizes the activity relating to the Company’s market-based stock options that were granted to certain executives and employees for the nine-month period ended September 30, 2023: SCHEDULE OF STOCK OPTIONS ACTIVITY
|  | Options |  |  | Weighted- Average Exercise Price |  |  | Weighted- Average Remaining Contractual Terms |  | Aggregate Intrinsic Value |
Outstanding at beginning of year |  |  | 5,065 |  |  | $ | 14.14 |  |  |  |  | $ | - |
Granted |  |  | 865 |  |  |  | 3.09 |  |  |  |  | $ | - |
Exercised |  |  | - |  |  |  | - |  |  |  |  | $ | - |
Forfeited or expired |  |  | (450 | ) |  |  | 2.85 |  |  |  |  | $ | 54 |
Outstanding at end of period |  |  | 5,480 |  |  | $ | 13.32 |  |  | 8.5 years |  | $ | - |
Exercisable at end of period |  |  | - |  |  | $ | - |  |  |  |  | $ | - |
The following table summarizes the activity relating to the Company’s stock options, excluding the market-based stock options that were granted to certain executives and employees, for the nine-month period ended September 30, 2023:
|  | Options |  |  | Weighted- Average Exercise Price |  |  | Weighted- Average Remaining Contractual Terms |  | Aggregate Intrinsic Value |
Outstanding at beginning of year |  |  | 2,727 |  |  | $ | 5.29 |  |  |  |  | $ | 1 |
Granted |  |  | 470 |  |  |  | 3.09 |  |  |  |  | $ | - |
Exercised |  |  | (16 | ) |  |  | 2.33 |  |  |  |  | $ | 9 |
Forfeited or expired |  |  | (964 | ) |  |  | 5.43 |  |  |  |  | $ | 19 |
Outstanding at end of period |  |  | 2,217 |  |  | $ | 4.78 |  |  | 7.3 years |  | $ | - |
Exercisable at end of period |  |  | 1,046 |  |  | $ | 5.56 |  |  | 5.9 years |  | $ | - |
The fair value of each option grant on the date of grant is estimated using the Black-Scholes option-pricing model reflecting the following weighted-average assumptions: SCHEDULE OF FAIR VALUE STOCK OPTION ASSUMPTIONS
|  | 2022 |  |  | 2023 |
|  | September 30, |
|  | 2022 |  |  | 2023 |
Expected volatility |  |  | 49.4 | % |  |  | 55.6 | %
Expected life of options (in years) |  |  | 7 |  |  |  | 6 |
Risk free interest rate |  |  | 1.73 | % |  |  | 3.87 | %
Dividend yield |  |  | 0 | % |  |  | 0 | %
Weighted-average fair value of options granted during the year |  | $ | 2.04 |  |  | $ | 1.66 |
Expected volatility is based on historical volatility of the Company’s common stock and the expected life of options is based on historical data with respect to employee exercise periods. The Company recorded stock-based compensation expense of $809 and $2,110 for the three- and nine-month periods ended September 30, 2022, respectively, and $781 and $1,984 for the three- and nine-month periods ended September 30, 2023, respectively, in connection with awards made under the stock option plans. The fair value of options vested during the nine-month periods ended September 30, 2022 and 2023 was $409 and $582, respectively. As of September 30, 2023, there was $1,561 of total unrecognized compensation cost related to non-vested options granted under the Company’s stock option plans that exclude the market-based stock options that were granted to certain senior managers, including the Company’s executive officers. That cost is expected to be recognized over a weighted-average period of 2.57 years. As of September 30, 2023, there was $5,245 of total unrecognized compensation cost related to non-vested options granted under the Company’s stock option plans for the market-based stock options that were granted to certain senior managers, including the Company’s executive officers. That cost is expected to be recognized over a weighted-average period of 4.11 years. The Company estimates forfeitures at the time of valuation and reduces expense ratably over the vesting period. This estimate is adjusted periodically based on the extent to which actual forfeitures differ, or are expected to differ, from the previous estimate. [B] Restricted Stock Awards: The Company grants restricted stock to employees, whereby the employees are contractually restricted from transferring the shares until they are vested. The stock is unvested at the time of grant and, upon vesting, there are no legal restrictions on the stock. The fair value of each share is based on the Company’s closing stock price on the date of the grant. A summary of all non-vested restricted stock for the nine-month period ended September 30, 2023 is as follows: SCHEDULE OF NON-VESTED RESTRICTED STOCK ACTIVITY
|  | Number of Non- Vested Shares |  |  | Weighted- Average Grant Date Fair Value |
Restricted stock, non-vested, beginning of year |  |  | 706 |  |  | $ | 4.75 |
Granted |  |  | 1,219 |  |  |  | 2.42 |
Vested |  |  | (237 | ) |  |  | 4.18 |
Forfeited |  |  | (141 | ) |  |  | 5.50 |
Restricted stock, non-vested, end of period |  |  | 1,547 |  |  | $ | 2.94 |
The Company recorded stock-based compensation expenses of $254 and $997 for the three- and nine-month periods ended September 30, 2022, respectively, and $320 and $801 for the three -and nine-month periods ended September 30, 2023, respectively, in connection with restricted stock grants. As of September 30, 2023, there was $3,704 of total unrecognized compensation cost related to non-vested shares. That cost is expected to be recognized over a weighted-average period of 3.16 years.

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