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Stock-Based Compensation

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

Note 12 – Stock-Based Compensation

In addition to cash compensation, the Company may compensate certain service providers, including employees, directors, consultants, and other advisors, with equity-based compensation in the form of stock options and restricted stock awards. The Company recognizes all equity-based compensation as stock-based compensation expense based on the fair value of the compensation measured at the grant date. For stock options, fair value is calculated at the date of grant using the Black-Scholes-Merton option-pricing model. For restricted stock awards, fair value is the closing stock price for the Company’s common stock on the grant date. The expense is recognized over the vesting period of the grant. For the periods presented, all stock-based compensation expense was classified as a component within selling, general and administrative expense in the Company’s consolidated statements of income.

The amount of stock-based compensation expense is as follows (in thousands):

	Year ended December 31,
	2020		2019
Stock options	$	117	$	147
Restricted stock awards		4		15
Total	$	121	$	162

As of December 31, 2020, the estimated unrecognized compensation cost from unvested awards which will be recognized ratably over the remaining vesting phase is as follows (in thousands):

Years ended December 31st:	Unvested stock options		Unvested restricted stock awards		Total unrecognized compensation expense
2021	$	82	$	1	$	83
2022		21				21
2023		4				4
2024		-		-		-
	$	107	$	1	$	108

The Company estimated the fair value of stock options using the Black-Scholes-Merton option-pricing model with the following assumptions (all share amounts have been adjusted to reflect the 1-for-4 reverse split that occurred in December 2020):

	Year ended December 31,
	2020			2019
Number of options awarded to purchase common shares		7,000			2,500
Risk-free interest rate		1.19	%		1.50	%
Expected volatility		94.7	%		100.3	%
Assumed dividend yield		N/A			N/A
Expected life of options from the date of grant		9.8 years			9.8 years

Equity Incentive Plans

Our 2006 Equity Incentive Plan (the “2006 Plan”) and 2016 Equity Incentive Plan (the “2016 Plan,” and together with the 2006 Plan, the “Plans”) provide for the issuance of stock-based awards to employees, officers, directors and consultants. The Plans permit the granting of stock awards and stock options. The vesting of stock-based awards is generally subject to the passage of time and continued employment through the vesting period.

Our 2006 Plan provided for the issuance of a maximum of 3.0 million shares of our common stock. The 2006 Plan terminated in September 2016. As of December 31, 2020, the 2006 Plan had 37,128 awards outstanding (all share amounts have been adjusted to reflect the 1-for-4 reverse split that occurred in December 2020).

Our 2016 Plan was ratified by our shareholders in May 2016 and provides for the issuance of a maximum of 5.0 million shares of our common stock, of which 4.9 million shares were still available for issuance as of December 31, 2020 (all share amounts have been adjusted to reflect the 1-for-4 reverse split that occurred in December 2020).

Stock Option Activity

The Company generally grants stock options to directors, eligible employees and officers as a part of its equity incentive plan. Restrictions and vesting periods for the stock option grants are set forth in the award agreements. A stock option grant represents an option to purchase a defined number of shares of the Company’s common stock to be released from restrictions upon completion of the vesting period. The awards typically vest in equal increments over one to three years. Stock option activity during 2020 and 2019 is summarized as follows (all share and dollar amounts have been adjusted to reflect the 1-for-4 reverse split that occurred in December 2020):

	Number of			Weighted avg. exercise price		Weighted avg. grant date fair		Weighted avg. remaining contractual life		Aggregate
	awards			per share		value per share		(in years)		intrinsic value

Outstanding, January 1, 2019		108,613		$	5.96	$	5.88		6.91	$	920,156
Granted		2,500			6.84		6.12		9.80
Exercised		-			-		-		-
Expired/Forfeited		(1,832	)		7.44		7.32		7.55
Outstanding, December 31, 2019		109,281		$	5.84	$	6.12		5.97	$	601,668
Granted		7,000			7.91		6.89		9.32
Exercised		(5,000	)		0.96		0.96		0.50
Expired/Forfeited		(6,195	)		7.36		7.26		6.98
Outstanding, December 31, 2020		105,086		$	6.25	$	6.06		5.38	$	814,090
Exercisable, December 31, 2020											82,972
Unvested, December 31, 2020											22,114

The aggregate intrinsic value of stock options represents the total pre-tax intrinsic value (the aggregate difference between the closing stock price of our common stock on December 31, 2020 and the exercise price for in-the-money options) that would have been received by the option holders if all in-the-money options had been exercised on December 31, 2020.

During the year ended December 31, 2020, a total of 6,195 options were forfeited, 2,313 of which were unvested (all share and dollar amounts have been adjusted to reflect the 1-for-4 reverse split that occurred in December 2020). The options were forfeited upon the employees’ termination from the Company. During the year ended December 31, 2019, a total of 1,832 options were forfeited, 2,080 of which were unvested (all share and dollar amounts have been adjusted to reflect the 1-for-4 reverse split that occurred in December 2020).

Restricted Stock Activity

The Company grants shares of restricted stock to directors, eligible employees and officers as a part of its equity incentive plan. Restrictions and vesting periods for the awards are set forth in the award agreements. Each share of restricted stock represents one share of the Company’s common stock to be released from restrictions upon completion of the vesting period. The awards typically vest in equal increments over one to three years. Shares of restricted stock are valued at the closing price of the Company’s common stock on the grant date and are recognized as selling, general and administrative expense over the vesting period of the award.

The following table summarizes activity for restricted stock awards for the fiscal years presented (all share and dollar amounts have been adjusted to reflect the 1-for-4 reverse split that occurred in December 2020):

				Weighted avg.
	Number of			grant date
	options			fair value
Non-vested restricted shares, January 1, 2019		7,500		$	9.52
Granted		-			-
Vested		(6,250	)		9.40
Forfeited		-			-
Non-vested restricted shares, December 31, 2019		1,250		$	10.20
Granted		-			-
Vested		-			-
Forfeited		-			-
Non-vested restricted shares, December 31, 2020		1,250		$	10.20