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Stock-Based Compensation
 12 Months Ended
Dec. 31, 2021
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation

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,  
    2021     2020  
Stock options   $ 132     $ 117  
Stock awards     158       -  
Restricted stock awards     1       4  
Total   $ 291     $ 121  

 

As of December 31, 2021, 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  
2022   $ 98     $ -     $ 98  
2023     40       -       40  
2024     11       -       11  
2025     -       -       -  
    $ 149     $ -     $ 149  

 

 

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

 

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,  
    2021     2020  
Number of options awarded to purchase common shares     17,000       7,000  
Risk-free interest rate     0.82 %     1.19 %
Expected volatility     70.1 %     94.7 %
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, 2021, the 2006 Plan had 22,126 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, 2021 (all share amounts have been adjusted to reflect the 1-for-4 reverse split that occurred in December 2020).

 

 

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

 

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 2021 and 2020 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):

 

                      Weighted avg.        
          Weighted avg.     Weighted avg.     remaining        
    Number of     exercise price     grant date fair     contractual life     Aggregate  
    awards     per share     value per share     (in years)     intrinsic value  
                               
Outstanding, January 1, 2020     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  
Granted     17,000       14.77       10.90       9.50          
Exercised     (19,295 )     2.51       3.08       1.58          
Expired/Forfeited     (2,556 )     7.18       6.88       -          
Outstanding, December 31, 2021     100,235     $ 8.36     $ 7.53       5.88     $ 620,445  
Exercisable, December 31, 2021                                     77,919  
Unvested, December 31, 2021                                     22,530  

 

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, 2021 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, 2021.

 

During the year ended December 31, 2021, a total of 2,556 options were forfeited, 1,687 of which were unvested. The options were forfeited upon the employees’ termination from the Company. 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).

 

Stock Activity

 

The Company grants shares of stock to directors, eligible employees and officers as a part of its equity incentive plan. Any restrictions and vesting periods for the awards are set forth in the award agreements. Each share of stock represents one share of the Company’s common stock. Shares of 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.

 

During 2021, the Company awarded 10,000 shares of the Company’s common stock at a fair market value price of $12.62 per share to an employee of the Company. The Company awarded 2,500 shares of the Company’s stock at a fair market value price of $12.75 to members of the board of the directors. No awards of stock were granted in 2020.

 

 

Where Food Comes From, Inc.

Notes to the Consolidated Financial Statements

 

The following table summarizes activity for non-vested 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 shares, January 1, 2020     1,250     $ 10.20  
Granted     -       -  
Vested     -       -  
Forfeited     -       -  
Non-vested shares, December 31, 2020     1,250     $ 10.20  
Granted     -       -  
Vested     (1,250 )     10.20  
Forfeited     -       -  
Non-vested shares, December 31, 2021     -     $ -