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Stock Options and Award Programs
 12 Months Ended
Dec. 31, 2020
Share-based Payment Arrangement [Abstract]  
Stock Options and Award Programs

The Company’s stock incentive plan is administered by the Compensation Committee and authorizes the grant or award of incentive stock options, non-qualified stock options (NQSO), restricted stock awards (RSA), stock appreciation rights, dividend equivalent rights, performance unit awards and phantom shares. The Company issues new shares of common stock upon the exercise of stock options. Any shares associated with options forfeited are added back to the number of shares that underlie stock options to be granted under the stock incentive plan. The Company has issued restricted stock awards and non-qualified stock option awards as described below.

 

Valuation of Stock Awards

 

Restricted Stock. The Company records the fair value of all restricted stock awards based on the grant date fair value and amortizes stock compensation on a straight-line basis over the vesting period. Restricted stock award shares are issued when vested and included in the total number of common shares issued and outstanding. During the years ended December 31, 2020 and 2019, the Company granted 231,873 RSAs and 66,274 RSAs, respectively.

 

Non-Qualified Stock Options. The Company estimates the fair value of nonqualified stock awards using a Black-Scholes Option Pricing model (“Black-Scholes model”). The fair value of each stock award is estimated on the date of grant using the Black-Scholes model, which requires an assumption of dividend yield, risk free interest rates, volatility, forfeiture rates and expected option life. The risk-free interest rates are based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. Expected volatilities are based on the historical volatility of our common stock over the expected option term. The expected term of options granted is based on analyses of historical employee termination rates and option exercises. The Company did not grant NQSOs during December 31, 2020. There were 2,500 of non-qualified stock option awards granted to a non-employee as compensation for investor relations services during December 31, 2019.

 

Restricted Stock Awards

 

A summary of RSA activity as of December 31, 2020 and 2019, and changes for the years then ended are set forth below:

 

    2020     2019  
NON-VESTED AWARDS            
             
Non-vested awards outstanding, January 1,     50,750       30,000  
Granted (+)     231,873       66,274  
Cancelled (-)     -       5,000  
Vested (-)     108,875 (1)      40,524  
Non-vested awards outstanding, December 31,     173,748       50,750  
                 
Weighted-average remaining contractual life (in years)     1.2       8.0  
                 
Unamortized RSA compensation expense   $ 362,426     $ 90,759  
                 
Aggregate intrinsic value of RSAs non-vested, December 31   $ 1,683,618     $ 197,925  
                 
Aggregate intrinsic value of RSAs vested, December 31   $ 708,920     $ 171,867  

 

(1) During the year ended December 31, 2020, the Company is reporting the issuance of RSAs upon vesting instead of at the time of grant. In the prior year, the Company reported RSAs as issued upon grant date. The amount of shares reported as vested upon grant in prior years were 50,750 shares.

 

Non-Qualified Stock Option Awards

 

Option pricing model assumptions for NQSO awards granted were valued using the following assumptions for December 31, 2019 as set forth below:

 

  YEAR ENDED DECEMBER 31, 2019
  Non-Qualified Stock Option Awards
  Employees Directors Non-Employees Total
         
Stock options granted -- -- 2,500 2,500
Expected dividend yield -- -- 0% 0%
Expected volatility -- -- 64.5% 64.5%
Risk-free interest rate -- -- 2.4% 2.4%
Forfeiture rate -- -- 1.2% 1.2%
Expected life -- -- 3 years 3 years

 

A summary of NQSO activity as of December 31, 2020 and 2019, and changes during the years then ended are set forth below:

 

    2020     2019  
          Weighted           Weighted  
          Average           Average  
          Grant Date           Grant Date  
NON-VESTED AWARDS   Shares     Fair Value     Shares     Fair Value  
                         
Non-vested balances, January 1,     84,166     $ 3.81       206,751     $ 3.56  
Granted (+)     -       -       2,500     $ 1.51  
Cancelled (-)     1,666     $ 2.60       8,000     $ 3.36  
Vested/Excercised (-)     30,000     $ 3.68       117,085     $ 3.35  
Non-vested balances, December 31,     52,500     $ 3.93       84,166     $ 3.81  

 

 

    2020     2019  
          Weighted           Weighted  
          Average           Average  
OUTSTANDING AND EXERCISABLE AWARDS   Shares     Exercise Price     Shares     Exercise Price  
                         
Awards outstanding, January 1,     350,833     $ 5.89       401,333     $ 5.85  
Granted (+)     -       -       2,500     $ 4.10  
Cancelled (-)     11,666     $ 4.47       53,000     $ 5.48  
Expired (-)     49,333     $ 6.03       -       -  
Exercised (-)     102,500     $ 6.40       -       -  
Awards outstanding, December 31,     187,334     $ 5.66       350,833     $ 5.89  
                                 
Awards vested and expected to vest,                                
December 31,     186,197     $ 5.67       331,018     $ 5.89  
                                 
Awards outstanding and exercisable,                                
December 31,     134,834     $ 5.37       266,667     $ 5.76  

 

The weighted-average remaining contractual life and the aggregate intrinsic value (the amount by which the fair value of the Company’s stock exceeds the exercise price of the option) of the stock options outstanding, exercisable, and vested and expected to vest as of December 31, 2020 are as follows:

 

          Vested and     Outstanding  
          Expected to     and  
    Outstanding     Vest     Exercisable  
                   
Weighted-average remaining contractual life (in years)     1.52       1.52       1.42  
Aggregate intrinsic value   $ 853,420     $ 847,465     $ 659,895  

 

 

Stock Compensation Expense

 

Share-based compensation recognized under ASC 718-10 (including restricted stock awards) represents both stock options based expense and stock grant expense. The Company recognized share-based compensation expense for the years then ended December 31 as set forth below:

 

    YEAR ENDED DECEMBER 31, 2020     YEAR ENDED DECEMBER 31, 2019  
    Shared-Based Compensation Expense     Shared-Based Compensation Expense  
    Employees     Directors     Non-Employees     Total     Employees     Directors     Non-Employees     Total  
                                                 
Restricted stock compensation expense   $ 375,122     $ 329,851     $ -     $ 704,973     $ 281,051     $ 100,200     $ -     $ 381,251  
Non-qualified option stock compensation expense     98,789       -       6,519       105,308       326,249       -       10,487       336,736  
                                                                 
Total share-based compensation before taxes   $ 473,911     $ 329,851     $ 6,519     $ 810,281     $ 607,300     $ 100,200     $ 10,487     $ 717,987  

  

At December 31, 2020, the Company had approximately $439,076 of total unamortized compensation expense that will be recognized over the weighted average period of 1.3 years.