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Stockholders' Equity
 12 Months Ended
Dec. 31, 2021
Stockholders' Equity  
12. Stockholders' Equity

Note 12 – Stockholders’ Equity

 

Dividends Declared

 

Dividends declared and paid on Common Stock were $1,694,148 and $1,957,142 for the years ended December 31, 2021 and 2020, respectively. The Company announced on February 2, 2022 that its Board of Directors approved a quarterly dividend of $0.04 per share payable in cash on March 15, 2022 to stockholders of record as of February 28, 2022 (see Note 19 - Subsequent Events).

 

Stock Options

Effective August 12, 2014, the Company adopted the 2014 Equity Participation Plan (the “2014 Plan”) pursuant to which a maximum of 700,000 shares of Common Stock of the Company were initially authorized to be issued pursuant to the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock and stock bonuses. Incentive stock options granted under the 2014 Plan expire no later than ten years from the date of grant (except no later than five years for a grant to a 10% stockholder). Non-statutory stock options granted under the 2014 Plan expire no later than ten years from the date of grant. The Board of Directors or the Compensation Committee determines the vesting provisions for stock awards granted under the 2014 Plan, subject to the provisions of the 2014 Plan. On August 5, 2020, the Company’s stockholders approved amendments to the 2014 Plan, including an increase in the maximum number of shares of Common Stock of the Company that are authorized to be issued pursuant to the 2014 Plan to 1,400,000.

The results of operations for the years ended December 31, 2021 and 2020 include stock-based compensation expense for stock options totaling approximately $55,000 and $68,000, respectively. Stock-based compensation expense related to stock options for the years ended December 31, 2021 and 2020 is net of estimated forfeitures of approximately 16% for both periods. Such amounts have been included in the consolidated statements of operations and comprehensive income (loss) within other operating expenses.

 

No options were granted during the year ended December 31, 2021. The weighted average estimated fair value of stock options granted during the year ended December 31, 2020 was $1.66 per share. The fair value of stock options at the grant date was estimated using the Black-Scholes option-pricing model.

 

The following weighted average assumptions were used for grants during the following periods:

 

 

 

 Years ended

 

 

 

 December 31,

 

 

 

 2021

 

 

 2020

 

 

 

 

 

 

 

 

Dividend Yield

 

 

n/a

 

 

 

3.14%

Volatility

 

 

n/a

 

 

 

37.69%

Risk-Free Interest Rate

 

 

n/a

 

 

 

1.40%

Expected Life

 

 

n/a

 

 

2.75 years

 

 

The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s stock options.

 

A summary of stock option activity under the Company’s 2014 Plan for the year ended December 31, 2021 is as follows:

 

Stock Options

 

Number of

Shares

 

 

 Weighted

Average

Exercise Price

per Share

 

 

 Weighted

Average

Remaining

Contractual Term

 

 

 Aggregate

Intrinsic Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at January 1, 2021

 

 

119,966

 

 

$8.26

 

 

 

3.55

 

 

$-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Granted

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

Exercised

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

Expired/Forfeited

 

 

(12,765)

 

$7.86

 

 

 

-

 

 

$-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2021

 

 

107,201

 

 

$8.31

 

 

 

2.92

 

 

$-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vested and Exercisable at December 31, 2021

 

 

37,500

 

 

$8.72

 

 

 

2.73

 

 

$-

 

The aggregate intrinsic value of options outstanding and options exercisable at December 31, 2021 is calculated as the difference between the exercise price of the underlying options and the market price of the Company’s Common Stock for the options that had exercise prices that were lower than the $5.00 closing price of the Company’s Common Stock on December 31, 2021. No options were exercised during the year ended December 31, 2021. The total intrinsic value of options forfeited during the year ended December 31, 2021 was $-0-, determined as of the date of forfeiture.

 

Participants in the 2014 Plan may exercise their outstanding vested options, in whole or in part, by having the Company reduce the number of shares otherwise issuable by a number of shares having a fair market value equal to the exercise price of the option being exercised (“Net Exercise”), or by exchanging a number of shares owned for a period of greater than one year having a fair market value equal to the exercise price of the option being exercised (“Share Exchange”).

 

As of December 31, 2021, the estimated fair value of unamortized compensation cost related to unvested stock option awards was approximately $9,000. Unamortized compensation cost as of December 31, 2021 is expected to be recognized over a remaining weighted-average vesting period of 0.50 years.

 

As of December 31, 2021, there were 440,774 shares reserved for grants under the 2014 Plan.

  

Restricted Stock Awards

 

A summary of the restricted Common Stock activity under the Company’s 2014 Plan for the year ended December 31, 2021 is as follows:

 

Restricted Stock Awards

 

Shares

 

 

 Weighted

Average Grant

Date Fair Value

per Share

 

 

 Aggregate

Fair Value

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2021

 

 

370,964

 

 

$9.96

 

 

$3,990,999

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Granted

 

 

392,435

 

 

$8.01

 

 

$3,144,323

 

Vested

 

 

(114,432)

 

$9.27

 

 

$(1,060,727)

Forfeited

 

 

(20,436)

 

$-

 

 

$-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2021

 

 

628,531

 

 

$7.01

 

 

$6,074,595

 

 

Fair value was calculated using the closing price of the Company’s Common Stock on the grant date. For the years ended December 31, 2021 and 2020, stock-based compensation for these grants was approximately $1,846,000 and $1,703,000, respectively, which is included in other operating expenses on the accompanying consolidated statements of operations and comprehensive income (loss). These amounts reflect the Company’s accounting expense and do not correspond to the actual value that will be recognized by the directors, executives and employees.

 

Employee Stock Purchase Plan

 

On June 19, 2021, the Company’s Board of Directors adopted the Kingstone Companies, Inc. Employee Stock Purchase Plan (the “ESPP”), subject to stockholder approval. Such approval was obtained on August 10, 2021. The purpose of the ESPP is to provide eligible employees of the Company with an opportunity to use payroll deductions to purchase shares of Common Stock of the Company. The maximum number of shares of Common Stock that may be purchased under the ESPP is 750,000, subject to adjustment as provided for in the ESPP. The ESPP was effective August 10, 2021 and expires on August 10, 2031. A maximum of 5,000 shares of Common Stock may be purchased by an employee during any offering period.

The ESPP currently provides for an offering period from November 1, 2021 through October 31, 2022 (“2021/2022 Offering”). For the years ended December 31, 2021 and 2020, stock-based compensation under the 2021/2022 Offering was approximately $4,000 and $-0-, respectively, which is included in other operating expenses on the accompanying consolidated statements of operations and comprehensive income (loss).