INCENTIVE STOCK PLANS AND STOCK BASED COMPENSATION

3 Months Ended

Mar. 31, 2022

INCENTIVE STOCK PLANS AND STOCK BASED COMPENSATION

INCENTIVE STOCK PLANS AND STOCK BASED COMPENSATION

NOTE 12 – INCENTIVE STOCK PLANS AND STOCK BASED COMPENSATION

The Company’s 2021 Equity Incentive Plan (the “Equity Incentive Plan”) covers 500,000 shares of Unico’s common stock (subject to adjustment in the case of merger, consolidation, reorganization, recapitalization, stock split, reverse stock split, split up, spin-off, combination of shares, exchange of shares, stock dividend, dividend in kind, etc.) and was approved by Unico’s stockholders on May 27, 2021. The Equity Incentive Plan provides for the grant of the following equity-based incentive awards to participants: (i) non-qualified stock options, (ii) stock appreciation rights, (iii) restricted stock, (iv) restricted stock units and (v) other stock-based awards. Through the date of this Form 10-Q there have been 44,250 non-qualified stock options granted and 48,000 restricted stock grants under the Equity Incentive Plan, of which none were vested and exercisable.

The exercise price, term and other conditions applicable to each non-qualified stock option and restricted stock granted under the Equity Incentive Plan are determined by the Company’s Compensation Committee of the Board of Directors. The exercise price of the stock options is set on the grant date and may not be less than the fair market value per share of the Company’s stock on that date (at market close). The non-qualified stock options granted under the Equity Incentive Plan in 2021 vest 25% on the first anniversary of the grant date and 25% annually thereafter on the anniversary date and expire four years after the date of the grant. The restricted stock grants granted under the Equity Incentive Plan in 2021 vest 100% on the fourth anniversary of the grant date. 

The Company recognized stock-based compensation expense in the amount of $14,795 for all awards issued under the Equity Incentive Plan in the “Salaries and employee benefits” line item in the Condensed Consolidated Statements of Operations for the three months ended March 31, 2022.  No stock-based compensation expense was recognized for the three months ended March 31, 2021.  

The fair value of each option award is estimated on the date of the grant using the Black-Scholes Option-Pricing Model using a number of complex and subjective variables. These variables include expected stock price volatility over the term of the awards, a risk-free interest rate and expected dividends.

Expected dividend yield is based on the historical dividend behavior as well as the expected dividend behavior of the Company. Expected volatility is based on the historical volatility of the Company’s stock. The risk-free rate for periods within the contractual life of the option is based on the U.S. treasury yield curve for a 30-day treasury in effect at the time of grant. The expected term represents an estimate of time the options are expected to remain outstanding. In accordance with ASC Topic 718, “Compensation – Stock Compensation,” the Company estimates forfeitures at the time of the grant and revises those estimates in subsequent periods if the actual forfeitures differ from those estimates.

The following table summarizes non-qualified stock option and restricted stock grants activity for three months ended March 31, 2022:

	Number of Shares			Weighted Average  Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding at December 31, 2021		31,250			4.52		3.79		-
Non-qualified stock option granted		-			-		-		-
Restricted stock granted		-			-		-		-
Forfeited or expired		(5,000	)		4.52		-		-
Exercised		-			-		-		-
Outstanding at March 31, 2022		26,250		$	4.52		3.62		-
Exercisable at March 31, 2022		-			-		-		-

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price and the exercise price, multiplied by the number of in the money options) that would have been received by the option holders had all options been exercised on March 31, 2022.

No options or restricted stock were granted to employees or non-employees during the three months ended March 31, 2022.  Unrecognized compensation cost was $125,945 at March 31, 2022 and is expected to be recognized over a weighted-average period of 3.62 years.  Compensation expense is reversed as options are forfeited. There were 26,250 options outstanding at March 31, 2022.  As of March 31, 2022, 500,000 shares of the Company’s common stock were available under the Equity Incentive Plan.  

As a result of the workforce reduction which occurred on April 1, 2022, an additional 3,750 shares were forfeited from two separated employees resulting in a further reduction in unrecognized compensation expense of $7,239.