12. 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 number of authorized shares available for issuance of common stock under the Plan is 1,500,000 shares.

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 nine months ended September 30, 2022 and 2021:

Schedule of Stock Option Activity 

Total unrecognized stock-based compensation expense related to unvested stock options at September 30, 2022 was approximately $18,500 and is expected to be recognized through the second quarter of 2024.

Warrants

As of September 30, 2022 and December 31, 2021, there were no warrants outstanding or exercisable.

Restricted Stock Units

As of September 30, 2022 and 2021, the following is a summary of restricted stock unit activity:

Schedule of Restricted Stock Award Activity 

During the period ended September 30, 2022, the Company granted 27,646 restricted stock units (“RSUs”) to a newly appointed non-employee director as partial compensation for his service as a director. The aggregate grant date fair value of the combined awards amounted to approximately $25,000. The RSU awards to the board members fully vest on the one-year anniversary after the date of grant. Also during the period ended September 30, 2022, 27,646 RSUs were forfeited due to a departure of a non-employee director.

In June 2022, the Company granted 138,228 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 board members fully vest on the one-year anniversary after the date of grant. The Company also granted 176,000 RSU’s to certain officers and managers with immediate vesting. The aggregate grant date fair value of the combined awards amounted to approximately $159,000.

During the period ended September 30, 2020, the Company granted 300,000 RSUs to the Company’s Chief Executive Officer. The RSU award grant to the CEO vests 1/3 on the grant date and the remaining 2/3 vested equally on the annual grant date anniversary of the award over the remaining two years with the final vesting occurring in the period ended September 30, 2022. The aggregate grant date fair value of the combined awards amounted to approximately $1,107,000.

The Company recorded non-cash stock-based compensation expense of $439,655 and $435,915 as a component of general and administrative expenses in the accompanying consolidated statements of operations for the nine months ended September 30, 2022 and 2021, respectively, pertaining to granting of restricted stock awards.

Total unrecognized stock-based compensation expense related to unvested restricted stock at September 30, 2022 was approximately $84,000 and is expected to be recognized through the second quarter of 2023.