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STOCK-BASED COMPENSATION

12 Months Ended

Feb. 28, 2022

Share-Based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION

NOTE 4: STOCK-BASED COMPENSATION

Stock Options – Under the 2013 Stock Incentive Plan, as amended (the "2013 Plan"), options can be granted to officers, directors, consultants and employees of the Company and its subsidiaries to purchase up to 2,500,000 shares of the Company's common stock. Under the 2013 Plan options expire ten years after the date of grant. As of February 28, 2022, there were 243,710 options outstanding under the 2013 plan.

Under the 2003 Stock Incentive Plan, as amended (the "2003 Plan"), until May 2013, options were available to be granted to officers, directors, consultants and employees of the Company and its subsidiaries to purchase up to 1,500,000 of the Company's common shares. As of February 28, 2022, there were 10,000 options outstanding under the 2003 Plan, under which no additional options may be granted.

Under the 2013 Stock Incentive Plan, option prices must be at least 100% of the fair market value of the common stock at time of grant. For qualified employees, except under certain circumstances specified in the plan or unless otherwise specified at the discretion of the Board of Directors, no option may be exercised prior to one year after date of grant, with the balance becoming exercisable in cumulative installments over a three-year period during the term of the option, and terminating at a stipulated period of time after an employee's termination of employment.

During fiscal 2022, the Company granted options to acquire 138,085 shares to employees exercisable at prices ranging from $3.19 to $6.26 and options to acquire 30,250 shares to the non-employee members of the board of directors with an exercise price of $3.19. The options granted to employees and directors vest over three years and expire in ten years. The options granted by the Company during fiscal 2022 had a combined weighted average grant date fair value of $2.76 per share.

During fiscal 2021, the Company granted options to acquire 60,500 shares to employees exercisable at prices ranging from $3.70 to $4.45 and options to acquire 20,000 shares to the non-employee members of the board of directors with an exercise price of $3.70. The options granted to employees and directors vest over three years and expire in ten years. The options granted by the Company during fiscal 2021 had a combined weighted average grant date fair value of $2.20 per share.

A summary of the activity of both plans for fiscal 2022 and fiscal 2021 is as follows:

										Weighted Average
		Stock Options								Exercise Price $								Remaining
		Outstanding				Exercisable				Outstanding				Exercisable				Term - Years
Balance - February 29, 2020			591,667				339,250			$	1.77			$	2.03				7.59
Granted			80,500								4.05
Exercised			(161,208	)							(1.05	)
Cancelled			(2,500	)							(2.55	)
Balance - February 28, 2021			508,459				333,500			$	2.35			$	2.17				6.99

Granted			168,335							$	5.10
Exercised			(403,334	)							(2.12	)
Cancelled			(19,750	)							(3.27	)
Balance - February 28, 2022			253,710				61,690			$	4.46			$	3.53				8.94

The aggregate intrinsic value of the Company’s vested and exercisable options at February 28, 2022 was $115,780.

For the years ended February 28, 2022 and 2021, the Company recognized $179,283 and $47,633 in stock based compensation expense, respectively. Such amounts are included in general and administrative expenses on the consolidated statements of income. Total compensation expense related to non-vested options not yet recognized as of February 28, 2022 was $456,000 and will be recognized over the next three years based on vesting date. The amount of future stock option compensation expense could be affected by any future option grants or by any forfeitures. During the year ended February 28, 2022, the Company had net settlement exercises of stock options, whereby, the optionee did not pay cash for the options but instead received the number of shares equal to the difference between the exercise price and the market price on the date of exercise. Net settlement exercises during the year ended February 28, 2022 resulted in 249,019 shares of common stock issued.

Determining the appropriate fair value of the stock-based awards requires the input of subjective assumptions, including the fair value of the Company’s common stock, and for stock options, the expected life of the option, and the expected stock price volatility. The Company uses the Black-Scholes option pricing model to value its stock option awards. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

The expected term of the options is estimated based on the Company’s historical exercise rate. The expected life of awards that vest immediately use the contractual maturity since they are vested when issued. For stock price volatility, the Company uses its expected volatility of the price of the Company’s common stock based on historical activity. The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected life of the option at the grant-date.

The weighted-average fair value of options has been estimated on the date of grant using the Black-Scholes options-pricing model. The weighted-average Black-Scholes assumptions are as follows:

		Fiscal Year Ended
		February 28, 2022			February 28, 2021
Expected life		5 - 8 years			5 - 8 years
Risk free interest rate		0.78% - 2.0%			0.46 – 0.78%
Expected volatility		50.73% - 57.13%			48.88% - 58.63%
Expected dividend yield		0%			0%