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Note 8 - Stock-based Compensation Expense

12 Months Ended

Dec. 31, 2024

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

NOTE 8 – STOCK-BASED COMPENSATION EXPENSE

Incentive Compensation Plan

In June 2021, the Company’s shareholders approved an amendment and restatement of the Company’s Incentive Compensation Plan (the “Plan”), that among other things, increased the number of shares of the Company’s common stock reserved for issuance under the Plan to 2,580,000 and extended the term of the Plan by five years to February 22, 2027. The Plan provides that the shares reserved under the Plan are available for issuance to officers of the Company, other key employees, non-employee directors, and advisors. No further grants or share issuances will be made under the previous plans. As of December 31, 2024, approximately 578,000 shares remain available for grant under the Plan.

Under the Plan, a total of 1,188,000 restricted stock units have been granted, consisting of 53,000 of annual automatic grants to non-employee directors, 327,000 of deferred retainer fees to non-employee members of the Board, 58,000 grants issued in lieu of commission or bonus to employees of the Company, and 750,000 restricted stock units issued to the Executive Chairman of the Board and other members of executive management, see further discussion below. Of the total restricted stock units granted under the Plan, 123,000 of them are fully vested but not yet deemed issued and outstanding, 864,000 are fully vested and outstanding, and 206,000 are outstanding as of December 31, 2024.

Changes in restricted stock units, consisting primarily of annual automatic grants, deferred compensation to non-employee directors, shares issued to employees as part of the Company’s bonus plan, and restricted stock units awards to the Executive Chairman of the Board and other members of executive management, under the Incentive Compensation Plans during 2024 and 2023 are as follows:

		*Restricted Stock Units*				*Grant Date Weighted- Average Fair Value*
Outstanding at January 1, 2023			6,000			$	2.33
Granted			146,000			$	2.97
Vested			(116,000	)		$	2.94

Outstanding at December 31, 2023			36,000			$	2.88
Granted			290,000			$	3.09
Vested			(120,000	)		$	2.93
Outstanding at December 31, 2024			206,000			$	3.07

NOTE 8 – STOCK-BASED COMPENSATION EXPENSE (CONTINUED)

Certain Executive Equity Awards

Effective May 4, 2020, the Company appointed Raymond C. Stachowiak as Interim President and Chief Executive Officer (“CEO”). Pursuant to his Offer Letter, Mr. Stachowiak was granted 50,000 restricted stock awards that vested in full on August 3, 2020. He was granted additional restricted stock awards totaling 10,000 common shares per month, which vested in full at the end of each 30-day period following issuance. Mr. Stachowiak became CEO of the Company on October 1, 2020 and served in such position until he was appointed Executive Chairman of the Board on March 7, 2023. For the year ended December 31, 2023, 120,000 restricted stock awards were issued to Mr. Stachowiak and 90,000 became fully vested. Total compensation expense recorded for the year ended December 31, 2023 in the consolidated financial statements of income related to executive equity awards was $351,000. For the year ended December 31, 2024, 120,000 restricted stock awards were issued to Mr. Stachowiak and 90,000 became fully vested. Total compensation expense recorded for the year ended December 31, 2024 in the consolidated financial statements of income related to the executive equity awards was $352,000.

For the year ended December 31, 2024, stock compensation expense recorded in the consolidated financial statements is summarized as follows:

						*Stock-Based*
		*Awards Issued*				*Compensation*
		*and Vested*				*Expense*
Options			—			$	17,000
Management Bonus Program - vested and issued			—				—
Board RSU Awards - other			—				4,000
Executive Compensation			120,000				352,000
			120,000			$	373,000

Total stock-based compensation expense before income tax effect for the Company’s options and restricted stock awards in the amount of $373,000 and $389,000 for the years ended December 31, 2024 and 2023, is reflected in selling and administrative expense in the consolidated statements of income, respectively.

Stock Options

Changes in stock options outstanding under the Plan during 2024 and 2023 are as follows:

Options		*Number of Options*				*Weighted Average Exercise Price*				*Weighted Average Remaining Contractual Term (Years)*				*Aggregate Intrinsic Value*
Balance at December 31, 2022			95,000			$	2.76				4.83			$	25,000
Granted			70,000			$	2.89				7.00			$	—
Forfeited			(19,000	)		$	2.69				—			$	—

Balance at December 31, 2023			146,000			$	2.83				5.44			$	—
Forfeited			(104,000	)		$	2.86				—			$	—

Balance at December 31, 2024			42,000			$	2.74				3.65			$	17,000

Exercisable at December 31, 2023			31,000			$	2.84				3.38			$	—

Exercisable at December 31, 2024			23,000			$	2.69				2.43			$	—

NOTE 8 – STOCK-BASED COMPENSATION EXPENSE (CONTINUED)

There were no options granted during 2024. The weighted average grant-date fair value of the options granted during 2023 was $2.89. There were no options exercised during the years ended December 31, 2024 and 2023. Total stock-based compensation expense recognized for stock options for the years ended December 2024 and 2023 was $17,000 and $34,000, respectively.

At December 31, 2024, there was approximately $23,000 of unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. This cost is expected to be recognized over a period of approximately three years.

The Company’s stock option awards to employees are calculated using the Black-Scholes options valuation model. The Black-Scholes model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, the Black-Scholes model requires the input of highly subjective assumptions including the expected stock price volatility. The Company’s stock-based awards have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the present value estimates. For these reasons, management believes that the existing models do not necessarily provide a reliable single measure of the fair value of its stock-based awards to employees.

There were no options granted during 2024. The fair value of the Company’s option grants issued during 2023 were estimated using assumptions for expected life, volatility, dividend yield, forfeiture rate, and risk-free interest rate which are specific to each award as summarized in the following table. The estimated fair value of the Company’s options is amortized over the period during which the optionee is required to provide service in exchange for the award, usually the vesting period.

There were no options granted during 2024. The fair value of the Company’s option grants under the Plan and 2023 was estimated using the following assumptions:

		2023
Expected life (years)			7.0
Expected forfeiture rate			0.0	%
Expected volatility			50	%
Dividend yield			0	%
Risk-free interest rate			3.6	%

The following summarizes the assumption inputs used for the Company’s Black-Scholes calculation:

Expected life (years): The expected term represents the weighted average period that the Company’s stock options are expected to be outstanding.

Expected forfeiture rate: Forfeitures are recognized as they occur.

Expected volatility: The expected volatility was derived from the Company’s historical stock volatility.

Dividend yield: The expected dividend yield was assumed to be zero, as the Company has not previously paid dividends on common stock and has no current plans to do so.

Risk-free interest rate: The risk-free interest rate is based on the interest yield in effect at the date of grant for zero coupon U.S. Treasury notes with maturities approximately equal to the option’s expected term.

Repurchase of Common Stock, Common Stock Warrants and Stock Options

In 1999 and 2001, the Board of Directors approved resolutions authorizing the Company to repurchase up to a total of 1,000,000 shares of its own stock on the open market, which the Board reaffirmed in 2008. There were no shares of the Company repurchased during 2024 or 2023. There are approximately 72,000 shares remaining under this repurchase authorization.