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Note 12 - Stock-based Compensation

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

Note 12 – Stock-Based Compensation

A summary of the Company’s Share Incentive Plans are as follows:

2007 Share Incentive Plan

On December 12, 2007, shareholders approved the Company’s 2007 Share Incentive Plan (“2017 Incentive Plan”), in connection therewith, 750,000 shares of the Company’s common stock are reserved for issuance pursuant to options or restricted stock that may be granted under the 2017 Incentive Plan through December 12, 2017. The Plan expired in December 2017. As of December 31, 2022, there were 120,000 options outstanding under this plan.

2016 Share Incentive Plan

On December 9, 2016, shareholders approved the Company’s 2016 Share Incentive Plan (“2016 Incentive Plan”), in connection therewith, 750,000 shares of the Company’s common stock are reserved for issuance pursuant to options or restricted stock that may be granted under the 2016 Incentive Plan through December 9, 2026. As of December 31, 2022, there were 477,000 options outstanding under this plan.

2022 Share Incentive Plan

On July 14, 2022, shareholders approved the Company’s 2022 Share Incentive Plan (“2022 Incentive Plan”), in connection therewith, 515,000 shares of the Company’s common stock are reserved for issuance pursuant to options or restricted stock that may be granted under the 2022 Incentive Plan through July 14, 2032. As of December 31, 2022, there were 76,000 options outstanding under this plan.

Under the 2016 and 2022 Share Incentive Plans, the purchase price of the common stock under each option plan shall be determined by the Committee, provided, however, that such purchase price shall not be less than the fair market value of the shares on the date such option is granted. The stock options generally expire seven to ten years after the date of grant.

As of December 31, 2022, there were 27,698 shares available for grant under the 2016 Equity Incentive Plan and 439,000 shares available for grant under the 2022 Equity Incentive Plan.

The Company recorded stock-based compensation of $0.4 million and $0.3 million for the years ended December 31, 2022 and 2021, respectively, that were included in the following line items in our Consolidated Statements of Operations (in thousands):

		2022				2021

Cost of revenue		$	34			$	30
Research and development			57				7
Selling			27				10
General and administrative			317				268

Total stock-based compensation expense		$	435			$	315

Stock-based compensation expense in both years included approximately $0.16 million related to restricted stock awards pursuant to a Director Compensation plan discussed below. The Company recognizes forfeitures of stock awards as they occur.

For the year ended December 31, 2022, the Company granted 198,500 stock options, vesting 25% per year over four years, with a ten-year life. The Company determined the fair value of stock options granted during the year ended December 31, 2022 is based upon weighted average assumptions as provided below.

Stock price		$	5.03
Exercise price		$	5.03
Dividend yield			0	%
Expected volatility			68	%
Risk-free interest rate			3.09	%
Expected life (in years)			6

The Company has 673,000 of outstanding stock options under the three plans at December 31, 2022.

The following table summarizes stock options awards for the years ended December 31, 2022 and 2021:

		Awards (in Shares)				Weighted Average Exercise Price

Outstanding at December 31, 2020			417,000			$	11.26

Granted			333,500				4.13
Expired / cancelled			(132,000	)			11.73
Exercised			-				-
Outstanding at December 31, 2021			618,500				7.32

Granted			198,500				5.04
Expired / cancelled			(144,000	)			11.72
Exercised			-				-
Outstanding at December 31, 2022			673,000			$	5.70

The following table summarizes information about the outstanding and exercisable options at December 31, 2022:

					Options Outstanding																Options Exercisable
									Weighted				Weighted												Weighted
									Average				Average												Average
Exercise					Number				Remaining				Exercise				Intrinsic				Number				Exercise				Intrinsic
Price Range					Outstanding				Contractual				Price				Value				Exercisable				Price				Value
$ 4.00	-	7.00				533,000				8.6			$	4.53			$	492,765				125,500			$	4.44			$	111,375
$ 7.01	-	10.00				20,000				5.3			$	8.07			$	-				20,000			$	8.07			$	-
$ 10.01	-	12.00				120,000				4.2			$	10.52			$	-				120,000			$	10.52			$	-

As of December 31, 2022, there was $1.1 million of unrecognized compensation costs related to stock options expected to be recognized over a weighted average period of 2.9 years.

Restricted Stock Awards

The following table summarizes restricted stock awards for the years ended December 31, 2022 and 2021:

						Weighted
						Average Grant
		Shares of				Date Fair
		Restricted Stock				Value
Unvested outstanding at January 1, 2021			-			$	-
Granted			42,800				4.65
Vested			(36,000	)			4.60
Forfeited or cancelled			(6,800	)			4.90
Unvested outstanding at December 31, 2021			-				-

Granted			32,000				5.02
Vested			(32,000	)			5.02
Forfeited or cancelled			-				-
Unvested outstanding at December 31, 2022			-			$	-

Pursuant to the Director Compensation plan approved on October 11, 2021, each of the four independent directors is entitled to compensation for an annual equity retainer in the amount of $40,000 per director, to be automatically granted on the date of the Company’s annual meeting of shareholders.

During the year ended December 31, 2022 and 2021, the Company’s directors received 32,000 and 36,000 shares, respectively, of restricted stock.

The fair value of the restricted stock awards is recorded as stock-based compensation expense over the vesting period and totaled $0.16 million in both years ending December 31, 2022 and 2021.

Restricted Stock Units

The following table summarizes restricted stock units for the years ended December 31, 2022 and December 31, 2021:

						Weighted
		Shares of				Average Grant
		Restricted				Date Fair
		Stock Units				Value
Unvested outstanding at January 1, 2021			8,750			$	5.00
Granted			-				-
Vested			(3,250	)			5.29
Forfeited or cancelled			-				-

Unvested outstanding at December 31, 2021			5,500				4.82
Granted			-				-
Vested			(5,500	)			4.82
Forfeited or cancelled			-				- -

Unvested outstanding at December 31, 2022			-			$	-

The total intrinsic value related to fully vested restricted stock units was $22,745 and $38,000 respectively for the years ended December 31, 2022 and 2021.