Stock Options and Restricted Stock Units

12 Months Ended

Dec. 31, 2022

Stock Options and Restricted Stock Units

Stock Options and Restricted Stock Units

Note 8: Stock Options and Restricted Stock Units

On May 23, 2014, the shareholders of the Company approved the 2014 Equity Incentive Plan (the “2014 Plan”). Under the terms of the 2014 Plan, the Company is authorized to issue incentive awards for common stock up to 200,000 shares to employees and other personnel. On June 10, 2016 and June 17, 2020, the shareholders of the Company approved an additional 200,000 and 200,000 awards, respectively, to be issued under the 2014 Plan, bringing the total number of shares to be awarded to 600,000. The awards may be in the form of incentive stock options, nonqualified stock options, restricted stock, restricted stock units and performance awards. The 2014 Plan is effective through March 31, 2024. As of December 31, 2022, there are 130,995 shares which remain to be granted under the 2014 Plan.

The following is a summary of stock options issued during the year ended December 31, 2022 and 2021:

	Number of Options Outstanding			Range of Exercise Price		Weighted Average Exercise Price		Aggregate Intrinsic Value
Balance on December 31, 2020		75,230		$	6.80 – 17.40	$	12.16	$	402,275
Options granted		—			—		—		—
Options exercised		(23,563	)		6.80 – 17.40		13.01		267,300
Options forfeited/cancelled		(4,500	)		9.26 – 13.21		11.45		62,385
Balance on December 31, 2021		47,167		$	6.80 – 17.40	$	11.81	$	832,254
Options granted		50,250			26.00 – 27.71		26.69		—
Options exercised		(10,000	)		7.76 – 13.21		9.12		185,500
Options forfeited/cancelled		(6,167	)		9.26 – 27.71		27.71		—
Balance on December 31, 2022		81,250		$	6.80 – 27.71	$	20.17		462,390

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (i.e. the aggregate difference between the closing price of the Company’s common stock on December 31, 2022 and 2021 of $25.04 and $29.45, respectively, and the exercise price for in-the-money options) that would have been received by the holders if all instruments had been exercised on December 31, 2022 and 2021. As of December 31, 2022, there was $403,000 of unrecognized compensation cost related to stock options, which will be recognized through 2026.

The following is a summary of unvested stock options during the year ended December 31, 2022 and 2021:

	Number of Options Outstanding			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
Balance on December 31, 2020		14,500		$	12.87	$	5.47
Options vested		(14,500	)		12.87		5.47
Options forfeited/cancelled		—			—		—
Balance on December 31, 2021		—			12.87		5.47
Options granted		50,250			26.69		12.54
Options vested		—			—		—
Options forfeited/cancelled		(6,000	)		27.71		13.53
Balance on December 31, 2022		44,250		$	26.55	$	12.41

The following table summarizes information about stock options outstanding and exercisable on December 31, 2022:

	Options Outstanding						Options Exercisable
Exercise Price Range	Number		Weighted Average Remaining Contractual Life (in Years)		Weighted Average Exercise Price		Number
$0.01 - 8.00		7,500		2.17		7.12		7,500
$8.01 - 11.00		3,500		4.57		10.11		3,500
$11.01 - 16.00		18,000		5.53		13.12		18,000
$16.01 - 27.00		38,000		8.30		24.19		8,000
$27.01 – 27.71		14,250		9.05		27.71		—
Total		81,250		7.13		20.31		37,000

Of the 81,250 stock options outstanding, 36,366 are non-qualified stock options. All options have been registered with the SEC.

The fair value of common stock options issued during the year ended December 31, 2022 were estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used:

	Year Ended December 31,2022
Expected dividend yield		0	%
Expected stock price volatility		46	%
Weighted-average risk-free interest rate		1.68	%
Weighted-average expected life of options (in years)		6.29

The following is a summary of restricted stock units issued during the years ended December 31, 2022 and 2021:

	Number of RSUs Outstanding			Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Balance on December 31, 2020		19,000		$	10.78	$	332,690
Units granted		17,765			25.92		460,504
Units vested/issued		(19,000	)		10.78		464,400
Units forfeited		—			—		—
Balance on December 31, 2021		17,765		$	25.92	$	523,197
Units granted		48,240			24.99		1,205,525
Units vested/issued		(15,265	)		26.05		377,981
Units forfeited		—			—		—
Balance on December 31, 2022		50,740		$	25.00	$	1,268,500

During the year ended December 31, 2022, the Company granted 48,240 restricted stock units with an average grant date fair value of $24.99 per share to certain employees and non-employee members of the Board of Directors of the Company. Non-employee directors were granted 12,240 restricted stock units, which vest on the earlier of the 2023 annual meeting of the shareholders or one year. The other 36,000 restricted stock units were granted to employees of the Company. During the year ended December 31, 2022, 15,265 restricted stock units with an average grant date fair value of $26.05 vested. As of December 31, 2022, there was $843,000 of unrecognized compensation cost related to unvested restricted stock units, which will be recognized through 2025. All restricted stock units have been registered with the SEC.

During the years ended December 31, 2022 and 2021, the Company recorded compensation expense of $763,000 and $333,000, respectively, related to stock options and restricted stock units.