13. Stock-Based Compensation

Equity Incentive Plans – The Company’s 2013 Equity Compensation Plan (the “2013 Plan”) was adopted for the purpose of providing equity incentives to employees, officers, directors and consultants including options, restricted stock, restricted stock units, stock appreciation rights, other equity awards, annual incentive awards and dividend equivalents. Through a series of amendments to the 2013 Plan, the Company is now authorized to issue 1,500,000 shares under the amended 2013 Plan.

Stock Options

The fair value of options is estimated on the date of grant using the Black-Scholes option pricing model. The valuation determined by the Black-Scholes pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The risk-free rate is based on the U.S. Treasury rate for the expected life at the time of grant, volatility is based on the average long-term implied volatilities of peer companies, the expected life is based on the estimated average of the life of options using the simplified method, and forfeitures are estimated on the date of grant based on certain historical data. The Company utilizes the simplified method to determine the expected life of its options due to insufficient exercise activity during recent years as a basis from which to estimate future exercise patterns. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts.

Forfeitures are required to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The following table summarizes the Company’s stock option activity for the years ended December 31, 2021 and 2020:

 Schedule of Stock Option Activity

On June 14, 2021, the Company granted 30,000 stock options. The stock option exercise price was $2.10 and the grant date fair value of this award was $32,550. The stock options are set to vest equally at 1/3 on the annual grant date anniversary of the award over the next three years.

On June 14, 2020, the Company granted 30,000 stock options at a stock option exercise price of $3.69 and the grant date fair value was $90,840. These stock options were forfeited in 2021.

The following assumptions were utilized in the Black-Scholes option pricing for the stock option grants for the years ended December 31, 2021 and 2020:

 Schedule of Fair Value Measurement Assumptions

The Company recorded non-cash stock-based compensation expense of approximately $19,000 and $33,000 as a component of general and administrative expenses in the accompanying consolidated statements of operations for the years ended December 31, 2021 and 2020, pertaining to stock options awards.

Total unrecognized stock-based compensation expense related to unvested stock options at December 31, 2021 was approximately $27,000 and is expected to be recognized through the second quarter of 2024.

Warrants

As of December 31, 2021, there were no warrants outstanding and exercisable. As of December 31, 2020, there were 125,000 warrants outstanding and exercisable, with a weighted average exercise price of $20.00 per share. These warrants expired on December 30, 2021.

Restricted Stock

A summary of restricted stock activity for the years ended December 31, 2021 and 2020 is as follows:

 Schedule of Restricted Stock Award Activity

During the year ended December 31, 2021 the Company granted 59,525 restricted stock units (“RSUs”) to non-employee directors as partial compensation for their service as a director. The aggregate grant date fair value of the combined awards amounted to approximately $125,000. The RSU award to the Board member fully vests on the one-year anniversary after the date of grant. The Company also granted 49,000 RSU’s to certain officers and managers with immediate vesting. The aggregate grant date fair value of the combined awards amounted to approximately $195,000.

During the year ended December 31, 2020, the Company granted 300,000 RSUs to the Company’s Chief Executive Officer and 33,875 RSUs non-employee directors as partial compensation for their service as a director. The RSU award grant to the CEO vests 1/3 on the grant date and the remaining 2/3 will vest equally on the annual grant date anniversary of the award over the next two years. The RSU award to the Board member fully vests on the one-year anniversary after the date of grant. The aggregate grant date fair value of the combined awards amounted to approximately $1,232,000.

The Company recorded non-cash stock-based compensation expense of approximately $634,000 and $587,000 as a component of general and administrative expenses in the accompanying consolidated statements of operations for the years ended December 31, 2021 and 2020, respectively, pertaining to restricted stock awards.

Total unrecognized stock-based compensation expense related to unvested restricted stock at December 31, 2021 was approximately $239,000 and is expected to be recognized through the second quarter of 2022.