NOTE 12. STOCK-BASED COMPENSATION PLAN

Under the Company’s current 2015 Stock Incentive Plan (the “2015 Plan”), the Company’s Board of Directors has flexibility to determine the type and amount of awards to be granted to eligible participants, who must be employees, directors, officers or consultants of the Company or its subsidiaries. The 2015 Plan allows for grants of incentive stock options, nonqualified stock options, restricted stock awards, stock appreciation rights, and restricted units. The aggregate number of shares of common stock that may be granted through awards under the 2015 Plan to any employee in any calendar year may not exceed 500 shares. The 2015 Plan will continue in effect until December 2025 unless terminated sooner.

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Options Granted:

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During the nine months ended September 30, 2023, the Company issued stock options for an aggregate of 75 shares under the 2015 Plan to directors of the Company. All 75 options vest and become exercisable over a period of one year. All of the issued stock options expire ten years from the date of the grant.  

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For computing the fair value of the stock-based awards, the fair value of each option grant has been estimated as of the date of grant using the Black-Scholes option-pricing model with the following assumptions:

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Options Granted During the Nine Months Ended September 30, 2023

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The grant date fair value of the stock options granted during the nine months ended September 30, 2023 was $186, which will be recognized over the vesting period of the options.

Market Condition Restricted Shares Granted:

On March 14, 2023, the Company awarded the Executive Chairman 500 restricted shares under the 2015 Plan, of which 250 and 250 shares will vest if, on or before March 14, 2033, the Fair Market Value (as defined in the Plan) of the Company’s common stock shall have equaled or exceeded $15.00 and $18.00 per share for twenty consecutive trading days, respectively. As the vesting terms of the restricted shares include a market condition, the fair value of the restricted stock was estimated as of the date of grant using the Monte-Carlo pricing model with the following assumptions:

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Using these assumptions, the grant date fair value of the restricted stock awards was approximately $4,046 and the expected term was between 2.56 and 3.22 years.

The total non-cash stock compensation expense related to restricted stock, stock options and stock awards recorded by the Company for the three months ended September 30, 2023 and 2022 was $1,168 and $2,220, respectively, and for the nine months ended September 30, 2023 and 2022 was $4,037 and $9,142, respectively. For the three and nine months ended September 30, 2023 and 2022, the majority of stock-based compensation costs were classified as selling, general and administrative expenses.

As of September 30, 2023, there were 388 unvested stock options and unrecognized compensation cost of $1,517 related to unvested stock options, as well as 1,617 unvested restricted stock awards and unrecognized compensation costs of $8,033 related to unvested restricted stock awards.