Stock-Based Compensation Plans

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

The Company has grants outstanding under three equity compensation plans, with two of the plans available for future grants of equity compensation awards to employees, consultants and directors. All of the equity plans were approved by shareholders. The 2007 Long-Term Incentive Compensation Plan (the "2007 Plan") and the 2007 Directors’ Incentive Plan (the "Directors’ Plan") superseded the 1999 Stock Option Plan. The 2007 Plan and the Directors’ Plan provide for the issuance of stock options, stock appreciation rights and restricted stock. Vesting is determined on a grant-by-grant basis in accordance with the terms of the plans and the related grant agreements. The Company has reserved 2.4 million shares of common stock for issuance under the 2007 Plan and 250,000 shares for issuance under the Directors’ Plan.

The exercise price of stock options is generally 100% of the fair market value of the underlying common stock on the grant date. The maximum contractual term of stock options is ten years from the date of grant, except for incentive stock options granted to 10% shareholders, which is five years.

During 2011, the Company began issuing shares of restricted stock with no exercise price to employees and directors. Restricted stock issued to employees generally cliff-vests on the fourth anniversary of the date of grant. Restricted stock issued to directors vests on the one year anniversary of the date of grant.

Stock compensation expense is presented as a component of general and administrative expense in the consolidated statements of operations. Stock compensation expense consisted of the following for the years ended December 31:


	2021		2020		2019

Share-based compensation - employees	$	730,412	$	1,050,179	$	1,481,016
Share-based compensation - nonemployees	11,455		(3,663)		4,882
Total share-based compensation	$	741,867	$	1,046,516	$	1,485,898

At December 31, 2021, there was approximately $1.1 million of unrecognized compensation cost related to share-based payments, which is expected to be recognized over a weighted-average period of 2.05 years. This amount relates primarily to unrecognized compensation cost for employee restricted stock and stock options awards.

Stock Options

The Company granted 186,900 incentive stock options during 2021, which vest in four years. There were no options exercised during 2021, 2020 and 2019. As such, there was no intrinsic value of options or weighted-average fair value of options exercised for the periods.

For the incentive stock options issued to date, the weighted average grant price was $3.17, and the weighted average fair value of these stock option grants was $1.52.

The fair value of stock options is calculated using the Black-Scholes (“Black-Scholes-Merton”, or “BSM”) option-pricing model on the date of grant. Since 2012, the Company had been issuing RSA’s (Restricted Share Awards) where the grant date Fair Value (“FV”) equaled the closing share price. The ISO’s required a BSM valuation to approximate FV. The following inputs were used in the creation of the valuation.

•Volatility - We estimate volatility in accordance with SAB No. 107, as amended by SAB No. 110. We have been publicly traded since August 2009, so we have sufficient years of trading history and volatility to appropriately evaluate this component of the BSM model. As such, we are using our own historical volatility to value stock options. We have noted no conditions that would indicate the historical volatility would not be an indicator of future volatility, as such we are using historical volatility over the same period as the expected term of the awards (7 years) back to 2017 and believe it to be sufficient. Calculated volatility for the grants issued in 2021 ranges from 31% to 43%. Our average volatility over the life of stock being public is 36% and 38% over the last 6 months. Based on the similar amounts, we believe our volatility estimate for the ISO’s are appropriate.

•Expected Term - We estimate the expected life of employee share options based on the simplified method allowed by SAB No. 107, as amended by SAB No. 110. Under this approach, the expected term is presumed to be the average between the weighted-average vesting period and the contractual term. The ISO’s have a 10-year contractual term and the vesting period is 4 years. This results in a calculated expected term of 7 years.

•Risk Free rate - The risk-free interest rate is based on the U.S. Treasury Note, on the date of grant with a term equal to the corresponding option’s expected term. So, in this case, we are using the 7 year treasury note as of the date of grant, which ranges from 1.27% and 1.44% at the date of the grants.

•Dividend yield - We have never declared or paid any cash dividends and there is currently no expected cash dividend payments as of the date of this grant. As such, dividend yield is zero.

Restricted Stock Awards

Restricted stock activity was as follows:


	Number of shares	Weighted- average grant-date fair value

Nonvested, December 31, 2019	814,949	$	5.88
Shares granted	231,091	3.56
Shares vested	(228,500)	4.62
Shares forfeited	(38,125)	5.87
Nonvested, December 31, 2020	779,415	5.56
Shares granted	223,750	1.84
Shares vested	(192,684)	6.29
Shares forfeited	(70,750)	4.47
Nonvested, December 31, 2021	739,731	$	4.34

The fair value of restricted stock granted was based on the closing market price of the Company’s common stock on the date of grant. The restricted stock grants are included in the diluted weighted shares outstanding computation until they cliff-vest. Once vested they are included in the basic weighted shares outstanding computation.