Stock Options and Award Programs

12 Months Ended

Dec. 31, 2023

Stock Options and Award Programs

Stock Options and Award Programs

15. 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 granted and included in the total number of common shares issued and outstanding. During the years ended December 31, 2023 and 2022, the Company granted 628,572 RSAs and 163,903 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. There were 288,570 stock option awards granted during the year ended December 31, 2023. There were no stock option awards granted during the year ended December 31, 2022.

Option pricing model assumptions for NQSO awards granted were valued using the following assumptions for the years then ended as set forth below:

	YEARS ENDED
	DECEMBER 31,
	2023		2022
Stock options granted		288,570		--
Expected dividend yield		--		--
Expected volatility		61.6% - 62.2%		--
Risk-free interest rate		4.1%		--
Term		4 years		--

Non-Qualified Stock Option Awards

A summary of NQSO activity as of December 31, 2023 and 2022, and changes during the years then ended are set forth below:

	2023				2022
			Weighted				Weighted
			Average				Average
			Grant Date				Grant Date
NON-VESTED OPTIONS	Shares		Fair Value		Shares		Fair Value
Non-vested balances, January 1,		-		-		25,000	$	3.98
Granted (+)		288,570	$	0.91		-		-
Expired (-)		-		-		25,000	$	3.98
Vested/Excercised (-)		-		-		-		-
Non-vested balances, December 31,		288,570	$	0.91		-		-

	2023				2022
			Weighted				Weighted
			Average				Average
OUTSTANDING AND EXERCISABLE OPTIONS	Shares		Exercise Price		Shares		Exercise Price
Awards outstanding, January 1,		7,500	$	4.90		140,000	$	5.79
Granted (+)		288,570	$	2.04		-		-
Cancelled (-)		-		-		5,000	$	4.40
Expired (-)		7,500	$	4.90		127,500	$	5.89
Awards outstanding, December 31,		288,570	$	2.04		7,500	$	4.90
Awards vested and expected to vest,
December 31,		285,923	$	2.04		7,500	$	4.90
Awards outstanding and exercisable,
December 31,		-		-		7,500	$	4.90

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, 2023 are as follows:

					Outstanding
			Expected to		and
	Outstanding		Vest		Exercisable
Weighted-average remaining contractual life (in years)		4.73		4.73		0.00
Aggregate intrinsic value	$	79,485	$	78,756	$	-

Restricted Stock Awards

A summary of RSA activity as of December 31, 2023 and 2022, and changes for the years then ended are set forth below:

	2023		2022
VESTED AND NON-VESTED AWARDS
Non-vested awards outstanding, January 1,		188,903		121,316
Granted (+)		628,572		163,903
Cancelled (-)		31,746		5,000
Vested (-)		169,737		91,316
Non-vested awards outstanding, December 31,		615,992		188,903
Weighted-average remaining contractual life (in years)		0.3		0.7
Unamortized RSA compensation expense	$	483,416	$	28,440
Aggregate intrinsic value of RSAs non-vested, December 31	$	1,429,101	$	343,822
Aggregate intrinsic value of RSAs vested, December 31	$	326,628	$	346,694

Long-Term Incentive Plan

The Company maintains a long-term incentive plan (LTIP) that covers the period of January 1, 2023 through January 1, 2026. The plan was approved by the Board of Directors in August 2023. The LTIP has two components of equity-based compensation.  The first is 250,000 Restricted Stock Awards (RSAs) that will be awarded to management and which will be issued to management in upcoming months, based on Board and management agreement. Of the 250,000 RSAs awarded, 83,333 are expected to vest on April 1, 2024. With the remaining awards vesting 83,333 on both January 1, 2025 and January 1, 2026. The second is 250,000 Performance- based Restricted Stock Units (PSRUs) that would vest upon meeting, by January 1, 2026, certain revenue, and adjusted EBITDA performance targets. As of December 31, 2023, the Company has not awarded the RSAs or PRSUs under this plan. 

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, 2023						YEAR ENDED DECEMBER 31, 2022
	Shared-Based Compensation Expense						Shared-Based Compensation Expense
	Employees		Directors		Total		Employees		Directors		Total
Restricted share-based compensation expense	$	641,730	$	272,464	$	914,194	$	265,704	$	262,878	$	528,582
Non-qualified option share-based compensation expense		46,797		-		46,797		-		-		-
Total share-based compensation before taxes	$	688,527	$	272,464	$	960,991	$	265,704	$	262,878	$	528,582

At December 31, 2023, the Company had approximately $0.7 million of total unrecognized share-based compensation expense, net of estimated forfeitures, related to share-based compensation that will be recognized over the weighted average remaining period of 1.0 years.