Stock Options and Warrants

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

STOCK OPTIONS AND WARRANTS

Note 15. STOCK OPTIONS AND WARRANTS

Stock-Based Compensation

Stock Options

In June 2022, the shareholders of the Company approved the adoption of the Company’s 2022 Equity Incentive Plan (“2022 Plan”) which authorized the grant of rights with respect to up to 100,000 shares.

During the years ended December 31, 2022 and 2021, the Company granted options to purchase 62,000 and 84,750 shares of common stock, respectively, to certain of its employees and directors.

The Company recorded stock based compensation expense of $310,000 and $443,000 in its Consolidated Statements of Operations for the years ended December 31, 2022 and 2021, respectively, and such amounts were included as a component of operating expenses.

The fair values of stock options granted were estimated using the Black-Sholes option-pricing model with the following assumptions for the years ended December 31:

	2022			2021
Risk-free interest rates		1.38% - 2.73	%		0.31% - 0.83	%
Expected life (in years)		2.50 - 4.00			2.50 - 4.00
Expected volatility		71.6% - 72.0	%		73.2% - 75.2	%
Dividend yield		0.00	%		0.00	%
Weighted-average grant date fair value per share	$	3.97		$	6.01

The expected life is the number of years that the Company estimates, based upon history, that the options will be outstanding prior to exercise or forfeiture. Expected life is determined using the “simplified method” permitted by Staff Accounting Bulletin No. 107. In addition to the inputs referenced above regarding the option pricing model, the Company adjusts the stock-based compensation expense for estimated forfeiture rates that are revised prospectively according to forfeiture experience. The stock volatility factor is based on the Company’s experience.

A summary of the status of the Company’s stock options as of December 31, 2022 and 2021, and changes during the two years then ended are presented below.

				Wtd. Avg.
				Exercise
	Options			Price
Balance, January 1, 2021		185,900		$	15.60
Granted during the year		84,750			13.00
Exercised during the year		(11,000	)		10.41
Terminated/Expired during the year		(12,800	)		61.70
Balance, December 31, 2021		246,850		$	12.54
Granted during the year		62,000			8.40
Exercised during the year		-			-
Terminated/Expired during the year		(5,800	)		12.04
Balance, December 31, 2022		303,050		$	11.70
Exercisable at December 31, 2022		245,466		$	12.07

Issuance of Stock Options

Issued in 2022

On January 31, 2022, the Company granted certain employees, stock options to purchase an aggregate of 3,000 shares of the Company’s common stock at a price of $8.50 per share. The options expire on the fifth anniversary of the grant date and vest over a term of three years.

On April 6, 2022, the Company granted to its directors, stock options to purchase an aggregate of 6,000 shares of the Company’s common stock at a price of $8.40 per share. The options expire on the fifth anniversary of the grant date and vest over a term of one year.

On April 11, 2022, the Company granted to certain members of management and certain employees, stock options to purchase an aggregate of 53,000 shares of the Company’s common stock at a price of $8.40 per share. The options expire on the fifth anniversary of the grant date and vest over a term of three years.

Issued in 2021

On January 11, 2021, the Company granted to its directors, stock options to purchase an aggregate of 7,000 shares of the Company’s common stock at a price of $13.20 per share. The options expire on the seventh anniversary of the grant date and vested over a term of one year.

On March 24, 2021, the Company granted to certain members of management and certain employees, stock options to purchase an aggregate of 32,750 shares of the Company’s common stock at a price of $13.90 per share. The options expire on the fifth anniversary of the grant date and vest over a term of three years.

On July 30, 2021, the Company granted to certain members of management and certain employees, stock options to purchase an aggregate of 41,500 shares of the Company’s common stock at a price of $12.20 per share. The options expire on the fifth anniversary of the grant date and vest over a term of one to three years.

On January 11, 2021, the Company granted to its directors, stock options to purchase an aggregate of 7,000 shares of the Company’s common stock at a price of $13.20 per share. The options expire on the seventh anniversary of the grant date and vested over a term of one year.

The following table summarizes information about outstanding stock options at December 31, 2022:

Range of Exercise Price	Number Outstanding		Wtd. Avg, Life		Wtd. Avg. Exercise Price
$8.40 - $15.60		303,050		2.7 years	$	11.70

The following table summarizes information about exercisable stock options at December 31, 2022:

Range of Exercise Price	Number Exercisable		Wtd. Avg, Life		Wtd. Avg. Exercise Price
$8.40 - $15.60		246,466		2.4 years	$	12.07

As of December 31, 2022, there was $95,000 of unrecognized compensation cost related to non-vested stock option awards, which is to be recognized over the remaining weighted average vesting period of 1.3 years.

The aggregate intrinsic value at December 31, 2022 was based on the Company’s closing stock price of $4.25 was $0. The aggregate intrinsic value at December 31, 2021 was based on the Company’s closing stock price of $9.10 was approximately $12,000. The aggregate intrinsic value was calculated based on the positive difference between the closing market price of the Company’s Common Stock and the exercise prices of the underlying options.

The weighted average fair value of options granted during the years ended December 31, 2022 and 2021 was $8.40 and $6.00 per share, respectively. The total intrinsic value of options exercised during the years ended December 31, 2022 and 2021 was $0 and $100,000 respectively. The total fair value of shares vested during the years ended December 31, 2022 and 2021 was $316,000 and $339,000, respectively.

Warrants

During both the years ended December 31, 2022 and 2021, the Company did not issue any warrants.

The following tables summarize the Company’s outstanding warrants as of December 31, 2022 and changes during the two years then ended:

						Wtd. Avg.
				Wtd. Avg.		Remaining
				Exercise		Contractual
	Warrants			Price		Life (years)
Balance, January 1, 2021		218,290		$	29.00		1.43
Granted during the period		-			-		-
Terminated/Expired during the period		(67,569	)		-		-
Balance, December 31, 2021		150,721		$	21.94		0.75
Granted during the period		-			-		-
Terminated/Expired during the period		(122,721	)	$	23.75		-
Balance, December 31, 2022		28,000		$	14.00		0.75
Exercisable at December 31, 2022		28,000		$	14.00		0.75

The aggregate intrinsic value at both December 31, 2022 and 2021 was $0 based on the Company’s closing stock price of $4.15 and $9.10, respectively.