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STOCK-BASED COMPENSATION
 3 Months Ended
Mar. 31, 2022
Share-Based Payment Arrangement [Abstract]  
STOCK-BASED COMPENSATION

NOTE 12. STOCK-BASED COMPENSATION

 

The Company recorded pre-tax compensation expense related to the grant of stock options and restricted stock issued of $394,749 and $326,164 for the three months ended March 31, 2022 and 2021, respectively.

 

As of March 31, 2022, the Company had adopted nine separate stock option and restricted stock plans: (i) the 2005 Stock Option and Restricted Stock Plan (the “2005 Plan”), (ii) the 2006 Stock Option and Restricted Stock Plan (the “2006 Plan”), (iii) the 2007 Stock Option and Restricted Stock Plan (the “2007 Plan”), (iv) the 2008 Stock Option and Restricted Stock Plan (the “2008 Plan”), (v) the 2011 Stock Option and Restricted Stock Plan (the “2011 Plan”), (vi) the 2013 Stock Option and Restricted Stock Plan (the “2013 Plan”), (vii) the 2015 Stock Option and Restricted Stock Plan (the “2015 Plan”), (viii) the 2018 Stock Option and Restricted Stock Plan (the “2018 Plan”) and (ix) the 2020 Stock Option and Restricted Stock Plan (the “2020 Plan”). The 2005 Plan, 2006 Plan, 2007 Plan, 2008 Plan, 2011 Plan, 2013 Plan, 2015 Plan, 2018 Plan and 2020 Plan are referred to as the “Plans.”

 

These Plans permit the grant of stock options or restricted stock to the Company’s employees, non-employee directors and others for up to a total of 6,675,000 shares of common stock. The 2005 Plan terminated during 2015 with 21,553 shares not awarded or underlying options, which shares are now unavailable for issuance. Stock options granted under the 2005 Plan that remain unexercised and outstanding as of March 31, 2022 total 5,689. The 2006 Plan terminated during 2016 with 54,787 shares not awarded or underlying options, which shares are now unavailable for issuance. Stock options granted under the 2006 Plan that remain unexercised and outstanding as of March 31, 2022 total 10,625. The 2007 Plan terminated during 2017 with 94,651 shares not awarded or underlying options, which shares are now unavailable for issuance. There are no stock options granted under the 2007 Plan that remain unexercised and outstanding as of March 31, 2022. The 2008 Plan terminated during 2018 with 40,499 shares not awarded or underlying options, which shares are now unavailable for issuance. There were no stock options granted under the 2008 Plan that remain unexercised and outstanding as of March 31, 2022.

 

The Company believes that such awards better align the interests of our employees with those of its stockholders.

 

Stock option grants. The Board of Directors has granted stock options under the Plans. These option awards have been granted with an exercise price equal to the market price of the Company’s stock at the date of grant with such option awards generally vesting based on the completion of continuous service and having ten-year contractual terms. These option awards typically provide for accelerated vesting if there is a change in control (as defined in the Plans). The Company has registered all shares of common stock that are issuable under its Plans with the SEC. A total of 190,845 shares remained available for awards under the various Plans as of March 31, 2022.

 

The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model.

 

A summary of all stock option activity under the Plans for the three months ended March 31, 2022 is as follows:

 

Options 

Number of

Shares

  

Weighted

Average

Exercise Price

 
Outstanding at December 31, 2021   1,086,063   $2.37 
Granted   25,000    0.98 
Exercised   —    — 
Forfeited   (15,000)   (4.80)
Outstanding at March 31, 2022   1,096,063   $2.31 
Exercisable at March 31, 2022   1,008,563   $2.37 

 

 

The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model. The total estimated grant date fair value stock options issued during the three months ended March 31, 2022 was $22,768. Following are certain estimates and assumptions utilized as of the issuance date to determine the grant-date fair value of the stock options issued during 2022:

 

Volatility – range   111.67%
Risk-free rate   1.8%
Contractual term   10.0 years 
Exercise price  $0.98 

 

The Plans allow for the cashless exercise of stock options. This provision allows the option holder to surrender/cancel options with an intrinsic value equivalent to the purchase/exercise price of other options exercised. There were no shares surrendered pursuant to cashless exercises during the three months ended March 31, 2022 and 2021.

 

The aggregate intrinsic value of options outstanding was $2,750 and $-0-, at March 31, 2022 and December 31, 2021, respectively. The aggregate intrinsic value of options exercisable was $1,375 and $-0-, at March 31, 2022 and December 31, 2021, respectively.

 

As of March 31, 2022, the unrecognized portion of stock compensation expense on all existing stock options was $127,814 and will be recognized over the next 3 months.

 

The following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable options under the Company’s option plans as of March 31, 2022:

 

    Outstanding options  Exercisable options

Exercise price

range

  

Number of

options

  

Weighted average
remaining

contractual life

 

Number of

options

  

Weighted average

remaining

contractual life

                
$0.01 to $2.49    740,000   8.4 years   652,500   8.2 years
$2.50 to $3.49    310,314   6.1 years   310,314   6.1 years
$3.50 to $4.49    45,750   2.9 years   45,750   2.9 years
                   
      1,096,064   7.5 years   1,008,564   7.3 years

 

Restricted stock grants. The Board of Directors has granted restricted stock awards under the Plans. Restricted stock awards are valued on the date of grant and have no purchase price for the recipient. Restricted stock awards typically vest over one to five years corresponding to anniversaries of the grant date. Under the Plans, unvested shares of restricted stock awards may be forfeited upon the termination of service to or employment with the Company, depending upon the circumstances of termination. Except for restrictions placed on the transferability of restricted stock, holders of unvested restricted stock have full stockholder’s rights, including voting rights and the right to receive cash dividends.

 

A summary of all restricted stock activity under the Plans for the three months ended March 31, 2022 is as follows:

 

  

Number of Restricted

shares

  

Weighted

average

grant date fair

value

 
Nonvested balance, December 31, 2021   1,057,375   $1.87 
Granted   715,000    1.07 
Vested   (463,375)   (1.89)
Forfeited   (15,000)   (1.26)
Nonvested balance, March 31, 2022   1,294,000   $1.43 

 

 

The Company estimated the fair market value of these restricted stock grants based on the closing market price on the date of grant. As of March 31, 2022, there were $1,180,036 of total unrecognized compensation costs related to all remaining non-vested restricted stock grants, which will be amortized over the next fifty-eight months in accordance with their respective vesting scale.

 

The nonvested balance of restricted stock vests as follows:

 

Years ended 

Number of

shares

 
     
2022 (April 1, 2022 through December 31, 2022)   119,500 
2023   668,000 
2024   294,000 
2025   90,000 
2026   82,500 
2027   40,000