Note 7 - Stock-based Compensation

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

Note 7.    Stock-based Compensation

In June 2021, the Company’s shareholders approved an amendment and restatement of the Company’s Incentive Compensation Plan (the “Plan”), that among other things, increased the number of shares of the Company’s common stock reserved for issuance under the Plan to 2,580,000 and extended the term of the Plan by five years to February 22, 2027. The Plan provides that the shares reserved under the Plan are available for issuance to officers of the Company, other key employees, non-employee directors, and advisors. No further grants or share issuances will be made under the previous plans. 

Stock-based compensation expense associated with the Company’s stock options to employees is calculated using the Black-Scholes valuation model. The Company’s stock awards have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value estimates. The estimated fair value of the Company’s option grants is estimated using assumptions for expected life, volatility, dividend yield, and risk-free interest rate which are specific to each award. The estimated fair value of the Company’s options is expensed over the period during which an employee is required to provide service in exchange for the award (requisite service period), usually the vesting period. Accordingly, stock-based compensation cost before income tax effect for the Company’s options and restricted stock awards in the amount of $98,000 and $291,000 for the three and nine-month periods ended September 30, 2023, respectively, and $76,000 and $235,000 in the same periods of the prior year, respectively, is reflected in selling and administrative expense in the condensed consolidated statements of operations. For the nine-month period ended September 30, 2023, there was approximately $164,000 of unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. This cost is expected to be recognized over a period of approximately four years. The weighted-average fair value of options granted during the nine-month period ended September 30, 2023 was $1.57.

The following table summarizes stock option activity for the nine-month periods ended September 30, 2023 and 2022:

	Stock Options			Grant Date Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in Years)		Intrinsic Value
Outstanding at January 1, 2023		95,000		$	2.76		4.83	$	25,000
Granted		70,000		$	2.82		7.00	$	-
Forfeited		(19,000	)	$	2.69		-	$	-
Outstanding at September 30, 2023		146,000		$	2.80		5.51	$	-
Exercisable at September 30, 2023		38,000		$	2.86		3.35	$	-
Outstanding at January 1, 2022		67,000		$	2.72		3.33	$	-
Granted		50,000		$	2.72		5.00	$	-
Exercised		(2,000	)	$	2.70		-	$	-
Forfeited		(7,000	)	$	2.58		-	$	-
Outstanding at September 30, 2022		108,000		$	2.73		4.85	$	9,000
Exercisable at September 30, 2022		50,000		$	2.74		2.74	$	-