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Stockholders Equity
 3 Months Ended
Mar. 31, 2024
Stockholders Equity  
Stockholders' Equity

Note 8 – Stockholders’ Equity

 

Dividends Declared and Paid

 

On November 11, 2022, the Company’s Board of Directors determined to suspend regular quarterly dividends. Future dividend policy will be subject to the discretion of the Company’s Board of Directors.

2014 Equity Participation Plan

 

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. On August 9, 2023, the Company’s stockholders approved an amendment to the 2014 Plan to increase the maximum number of shares of Common Stock of the Company that are authorized to be issued pursuant to the 2014 Plan to 1,900,000. The 2014 Plan terminates on August 12, 2024 and no further awards may be granted under the 2014 Plan after such date.

 

As of March 31, 2024, there were 118,329 shares reserved for grants under the 2014 Plan.

 

Stock Options

 

The results of operations for the three months ended March 31, 2024 and 2023 include stock-based compensation expense for stock options totaling approximately $53,000 and $-0-, respectively. Stock-based compensation expense related to stock options for the three months ended March 31, 2024 is net of estimated forfeitures of approximately 12%. Such amounts have been included in the condensed consolidated statements of operations and comprehensive income (loss) within other operating expenses.

 

The weighted average estimated fair value of stock options granted during the three months ended March 31, 2024 was $1.24 per share.  No options were granted during the three months ended March 31, 2023.  The fair value of stock options at the grant date was estimated using the Black-Scholes option-pricing model. 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.

 

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

 

 

 

 Three months ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

Dividend Yield

 

 

0.00%

 

 

n/a

 

Volatility

 

 

74.72%

 

 

n/a

 

Risk-Free Interest Rate

 

 

4.17%

 

 

n/a

 

Expected Life

 

3.50 years

 

 

 

n/a

 

A summary of stock option activity under the Company’s 2014 Plan for the three months ended March 31, 2024 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, 2024

 

 

107,201

 

 

$8.31

 

 

 

0.94

 

 

$-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Granted

 

 

318,750

 

 

$2.25

 

 

 

4.73

 

 

$701,250

 

Exercised

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

Expired/Forfeited

 

 

(15,000)

 

$2.25

 

 

 

4.88

 

 

$18,150

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at March 31, 2024

 

 

410,951

 

 

$3.83

 

 

 

3.67

 

 

$668,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vested and Exercisable at March 31, 2024

 

 

107,201

 

 

$8.31

 

 

 

0.70

 

 

$-

 

 

 

The aggregate intrinsic value of options outstanding and options exercisable at March 31, 2024 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 $4.45 closing price of the Company’s Common Stock on March 31, 2024. The total intrinsic value of options when forfeited are determined as of the date of forfeiture. The total intrinsic value of options when expired are determined as of the date of expiration.

 

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, 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.

 

As of March 31, 2024, the estimated fair value of unamortized compensation cost related to 303,750 unvested stock option awards was approximately $270,000. Unamortized compensation cost as of March 31, 2024 is expected to be recognized over a remaining weighted-average vesting period of 2.77 years.

Restricted Stock Awards

 

A summary of the restricted Common Stock activity under the 2014 Plan for three months ended March 31, 2024 is as follows:

 

Restricted Stock Awards

 

Shares

 

 

 Weighted

Average Grant

Date Fair Value

per Share

 

 

 Aggregate

Fair Value

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2024

 

 

550,581

 

 

$3.82

 

 

$2,103,219

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Granted

 

 

163,617

 

 

$2.13

 

 

$348,504

 

Vested

 

 

(233,627)

 

$1.83

 

 

$(427,537)

Forfeited

 

 

(1,100)

 

$4.80

 

 

$(5,280)

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2024

 

 

479,471

 

 

$4.21

 

 

$2,018,573

 

 

 

Fair value was calculated using the closing price of the Company’s Common Stock on the grant date. For the three months ended March 31, 2024 and 2023, stock-based compensation for these grants was approximately $213,000 and $217,000, respectively, which is included in other operating expenses on the accompanying condensed 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.

 

Warrants

 

In connection with the Exchange Agreement (see Note 7 – Debt – “Note and Warrant Exchange”), as additional consideration, on December 15, 2022, the Company issued warrants to the Exchanging Noteholders to purchase 969,525 shares of Common Stock. The fair value of the warrants, using the Black-Scholes valuation formula, was $993,200, which has been capitalized as a deferred financing cost of the 2022 Notes. The fair value of the warrants is being amortized over the life of the warrants, which is 36.5 months.

 

The warrants are exercisable through December 30, 2025 at an exercise price of $1.00 per share. Holders of the warrants may exercise their outstanding warrants in cash, or, 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 warrants being exercised.

 

As of March 31, 2024, all warrants for the purchase of an aggregate of 969,525 shares of Common Stock were outstanding.

 

No warrants were granted during the three months ended March 31, 2024 and 2023.