Note J - Stock Option Plans

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

NOTE J — STOCK OPTION PLANS

In June 2011, the stockholders of Milestone Scientific approved the 2011 Stock Option Plan (the "2011 Plan") which originally provided for stock options to our employees, directors and consultants and incentive and non-qualified stock options to purchase up to 2,000,000 shares of common stock and was later amended in 2016 to increase the maximum number of shares reserved for grant to 4,000,000. Generally, options become exercisable over a three-year period from the grant date and expire five years after the date of grant.  As of December 31, 2021 and 2020 the Company had 811,597, and 424,425, respectively, remaining options available for grants under the Plan.

The Milestone Scientific Inc. 2020 Equity Compensation Plan, as amended and restated (the "2020 Plan"), provides for awards of restricted common, stock restricted stock units, options to purchase and other awards, up to a maximum 4,000,000 shares of common stock and expires in June 2031. Options may be granted to employees, directors, and consultants of Milestone Scientific for the purchase of shares of common stock at a price not less than the fair market value of common stock on the date of grant. In general, options become exercisable over a three-year period from the grant date and expire five years after the date of grant. 

On April 8, 2021, as part of its Succession Plan going into effect on April 23, 2021, the Company announced that Leonard Osser, the Interim Chief Executive Officer, would be accepting the role of Vice Chairman of the Board of Directors. As part of accepting this role, he would be granted options to purchase 2,000,000 shares of common stock, exercisable at the fair market value of the common stock on the date of grant, vesting over the five-year period after he steps down as Interim Chief Executive Officer of the Company or ten years from the date of grant, whichever shall end first. The options were issued pursuant to the 2020 Plan.

Milestone Scientific recognizes compensation expense over the requisite service period and in the case of performance-based options over the period of the expected performance. For the twelve months ended December 31, 2021 and 2020, Milestone Scientific recognized approximately $763,000, and $537,000 of total employee compensation cost, respectively, recorded in general and administrative expenses on the statement of operations.

As of December 31, 2021, and 2020, there was $3.2 million and $0.9  million of total unrecognized compensation cost related to non- vested options, respectively. Milestone Scientific expects to recognize these costs over a weighted average period of 3.49 and 2.98 years as of December 31, 2021, and 2020, respectively.

A summary of option activity for employees under the plans and changes during the years ended  December 31, 2021 is presented below:   

	Number of Options			Weighted Averaged Exercise Price $		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Options Value $
Options outstanding January 1, 2021		1,953,443		$	1.88		3.09	$	476,964
Granted during 2021		2,140,175			2.46		8.92		-
Exercised during 2021		(818,166	)		1.70		-		-
Forfeited or expired during 2021		(431,759	)		2.02		-		-
Options outstanding December 31, 2021		2,843,693		$	2.39		7.69		49,246
Exercisable, December 31, 2021		522,157			2.19		3.90		32,831

The weighted-average grant date fair value per share of options granted to employees during the year ended December 31, 2021, and 2020 was $1.56 and $1.25, respectively. The aggregate intrinsic value of options granted to employees exercised was $290,688 and $330,231 for the years ended December 31, 2021, and 2020, respectively.

The Company used the following assumptions to calculate the fair value of the stock option grants using the Black-Scholes option pricing model on the measurement date during the year ended December 31, 2021, risk free interest rate of .19% to 1.15%, Volatility of 69.10% to 95.16% (which is based on the Company’s historical volatility over the expected term), expected term of 3 to 6.5 years, 0% dividend rate and closing price of the stock of $2.13 to $3.79.   

A summary of option activity for non-employees under the plans and changes during the years ended  December 31, 2021 and 2020, is presented below:

	Number of Options			Weighted Averaged Exercise Price $		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Options Value $
Options outstanding January 1, 2021		74,997		$	1.41		3.18	$	54,748
Granted		24,999			3.28		4.43		-
Exercised		(8,333	)		1.70		-		-
Forfeited		(8,333	)		2.34		-		-
Options outstanding December 31, 2021		83,330			1.85		3.33		49,748
Exercisable, December 31, 2021		55,546			1.45		2.97		45,079

The fair value of the non-employee options was estimated on the date of grant using the Black Scholes option-pricing model at the date of grant. For the twelve months ended December 31, 2021 and 2020, Milestone Scientific recognized approximately $27,600 and $13,600 expense related to non-employee options, respectively.

The Company used the following assumptions to calculate the fair value of the stock option grants using the Black-Scholes option pricing model on the measurement date during the year ended December 31, 2021, risk free interest rate of  0.2%-0.5 %, Volatility of 86.97% to 94.05%, expected term of 5 years, 0% dividend rate and closing price of the stock of $1.65 to $1.75.  

The information below summarizes the restricted stock award activity for year ended December 31, 2021

Restricted Stock Awards	Shares			Weighted Average Grant-Date Fair Value per Award
Non-vested as January 31, 2021		-			-
Granted		116,399			2.36
Vested		-			-
Cancelled		(19,842	)		2.52
Non-vested as December 31, 2021		96,557			2.33

As of December 31, 2021, there were 96,551 restricted shares granted and deferred under the terms of an employment agreements with the Territory Manager of Milestone Scientific. Such shares will be issued to each party upon completion of 2 years of employment. For the years ended December 31, 2021, the Company recognized stock compensation expense of approximately $70,000. As of December 31, 2021, the total unrecognized compensation expense was $159,375 related to unvested restricted stock awards, which the Company expects to recognize over an estimated weighted-average period of 1.38 years. No restricted stock awards were granted during the year ended December 31, 2020.