Note 8 - Stock-based Compensation Expense

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

NOTE 8:         STOCK-BASED COMPENSATION EXPENSE

The Company recorded $97,110 and $50,373 during the three months ended March 31, 2022 and 2021, respectively, for the cost of employee and director services received in exchange for equity instruments based on the grant-date fair value of those instruments. The following table summarizes the compensation expense recorded for the three months ended March 31, 2022 and 2021 related to stock-based compensation.

	Three months ended March 31,
	2022		2021
Cost of revenue	$	16,029	$	-
Engineering, research and development	$	3,941	$	-
Selling and shipping	$	5,246	$	-
General and administrative	$	71,894	$	50,373
Total	$	97,110	$	50,373

A summary of the stock option activity related to the 2007 Share Incentive Plan and the 2016 Share Incentive Plan for the period from January 1, 2022 through March 31, 2022 are as follows:

2007 Share Incentive Plan
	Beginning		Granted		Exercised		Canceled		Ending
	Balance		During		During		During		Balance
	Outstanding		Period		Period		Period		Outstanding		Exercisable
Number of shares		220,000		-		-		-		220,000		220,000
Weighted average exercise price per share	$	12.56		-		-		-	$	12.56	$	12.56

2016 Share Incentive Plan
	Beginning		Granted		Exercised		Canceled			Ending
	Balance		During		During		During			Balance
	Outstanding		Period		Period		Period			Outstanding		Exercisable
Number of shares		398,500		12,500		-		(2,500	)		408,500		65,000
Weighted average exercise price per share	$	4.43	$	4.60		-	$	4.01		$	4.43	$	5.94

For the three months ended March 31, 2022, the Company granted 12,500 stock options, vesting 25% per year over four years, with a ten-year life. The Company determined the fair value of stock options granted during the three months ended March 31, 2022 is based upon weighted average assumptions as provided below.

Stock Price	$	4.60
Exercise Price	$	4.60
Dividend yield		0	%
Expected volatility		68	%
Risk-Free interest rate		1.79	%
Expected life (in years)		6.00

The Company has a total of 628,500 outstanding stock options, of which 285,000 were exercisable under the two plans at March 31, 2022.

The following table summarizes information about the outstanding and exercisable options at March 31, 2022.

				Options Outstanding								Options Exercisable
						Weighted		Weighted						Weighted
						Average		Average						Average
Exercise				Number		Remaining		Exercise		Intrinsic		Number		Exercise		Intrinsic
Price Range				Outstanding		Contractual		Price		Value		Exercisable		Price		Value
$	4.00	-	7.00		388,500		9.1	$	4.25	$	116,000		45,000	$	5.00	$	0
$	7.01	-	10.00		20,000		6.1	$	8.07	$	0		20,000	$	8.07	$	0
$	10.01	-	12.00		120,000		3.3	$	10.52	$	0		120,000	$	10.52	$	0
$	12.01	-	15.00		100,000		.4	$	15.00	$	0		100,000	$	15.00	$	0

No options were exercised during the three months ended March 31, 2022. As of March 31, 2022, there was $693,000 of unrecognized compensation costs related to stock options expected to be recognized over a weighted average period of 3.3 years.

Restricted Stock Awards

There were no unvested shares of restricted stock at March 31, 2022 and December 31, 2021. During the three months ended March 31, 2022 there were no grants of restricted stock.

Pursuant to the director compensation plan approved on October 11, 2021, each director is entitled to Director Compensation for an Annual Equity Retainer in the amount of $40,000, to be automatically granted on the date of the Company’s annual meeting of shareholders (directors may elect to receive payment in restricted stock, stock options or a combination thereof).

Restricted Stock Units

The following table summarizes activity related to outstanding restricted stock units for the three months ended March 31, 2022:

				Weighted
	Shares of			Average Grant
	Restricted			Date Fair
	Stock Units			Value
Unvested outstanding at December 31, 2021		5,500		$	4.82
Granted		-		$	-
Vested		(5,500	)	$	4.82
Forfeited/Cancelled		-		$	-
Unvested outstanding at March 31, 2022		-		$	-

The total fair value of vested restricted stock units was $3,458 for the three months ended March 31, 2022. As of March 31, 2022, there was no unrecognized compensation costs related to restricted stock units.