Note 4 - Stock-based Compensation

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

4. Stock-Based Compensation

The Company maintains the 2019 Equity Incentive Plan (the “2019 Plan”). The 2019 Plan replaced the 1995 Incentive Stock Option Plan (the "1995 Plan) upon its ratification by shareholders in April 2019.   The 1995 plan authorized the issuance of up to 442,750 shares of common stock through grants of restricted stock units and options.  Of those shares, 1,000 were subject to outstanding options as of June 30, 2021.  Awards granted under the 1995 Plan will remain in effect until they are exercised or expire according to their terms.    At the time the 2019 Plan was approved, there were 102,157 shares reserved for future grants under the 1995 Plan which will no longer be available for future grants.  

Under the terms of the 2019 Plan, the number of shares of common stock that may be the subject of awards and issued under the 2019 Plan was initially set at 102,157.  Subsequent to the approval of the 2019 Plan, 12,750 outstanding options granted under the 1995 Plan were forfeited.  Under the terms of the 2019 Plan, those forfeited options are added back to the 2019 Plan reserve pool.  As of June 30, 2021, 90,850 restricted stock units (RSUs) and 23,250 options have been granted under the 2019 Plan, of which 750 stock options and 2,400 RSUs have been forfeited, bringing the number of shares of common stock available for future awards under the 2019 Plan to 3,957.

The Company charged compensation cost of approximately $131,600 against the loss for the six months ended June 30, 2021 and approximately $7,400 for the six months ended June 30, 2020.   As of June 30, 2021, there was approximately $674,000 of unrecognized compensation cost related to unvested share-based compensation awards. That cost is expected to be recognized over the next four years.

The Company receives a tax deduction for certain stock option exercises during the period in which the options are exercised, generally for the excess of the market price at the time the stock options are exercised over the exercise price of the options, which increases additional paid in capital and reduces income taxes payable.

Proceeds from the exercise of 3,000 stock options with an intrinsic value of approximately $24,000 were approximately $27,700 for the six months ended June 30, 2021.  No stock options were exercised during the six months ended June 30, 2020.

There were 10,000 options granted during the six months ended June 30, 2021 and 2020. The fair value of options granted during the six months ended June 30, 2021 and 2020 were estimated using the Black Scholes option pricing model with the following assumptions:

	2021			2020
Dividend yield		—			—
Expected volatility		51.6	%		40.3	%
Expected life of option (years)		10			10
Risk-free interest rate		0.5	%		1.4	%
Fair value of each option on grant date	$	6.84		$	2.90

Stock option activity during the six months ended June 30, 2021 was as follows:

				Weighted
				Average
				Exercise
	Shares			Price
Outstanding at January 1, 2021		17,500		$	6.97
Granted		10,000			11.50
Exercised		(3,000	)		9.23
Expired and forfeited		(1,000	)		10.75
Outstanding at June 30, 2021		23,500		$	8.45
Exercisable at June 30, 2021		5,165		$	6.54

The aggregate intrinsic value of all options outstanding and for those exercisable at June 30, 2021 was approximately $58,700 and $20,700, respectively.

There were 36,550 RSUs granted during the six months ended June 30, 2021.  The shares underlying the awards were assigned a weighted average value of $11.01 per share, based on the closing price of the Company's common stock on the date of grants.  These awards scheduled vesting period ranges from some awards vesting at the  time of the grant up to four years.  No RSUs were granted during the six months ended June 30, 2020.

RSU activity during the six months ended June 30, 2021 is summarized as follows:

				Weighted
				Average
	Number of			Grant Date
	Shares			Fair Value
Unvested shares at January 1, 2021		54,300		$	6.11
Granted		36,550			11.01
Vested		(1,340	)		11.30
Forfeited or surrendered		(2,400	)		6.11
Unvested shares at June 30, 2021		87,110			8.09