NOTE 6 CAPITAL STOCK, STOCK PLANS, WARRANTS AND STOCK BASED COMPENSATION

Stock Option Plans

The Company’s 2003 Outside Directors Stock Plan (the “2003 Plan”) provides for the grant of Non-Qualified Stock Options (“NQSOs”) to member of the Company’s Board of Directors (the “Board”) who is not an employee of the Company or its subsidiaries (“Eligible Director”). On July 20, 2021, the Company’s stockholders approved an amendment (the “Amendment”) to the 2003 Plan which provided the following, among other things: i) authorized an additional 500,000 shares of the Company’s Common Stock for issuance under the 2003 Plan, (ii) increased (a) the number of shares of Common Stock subject to the automatic option grant made to each Eligible Director upon initial election, from 6,000 to 20,000 shares, and (b) the number of shares of Common Stock subject to the automatic option grant made to each Eligible Director upon reelection, from 2,400 to 10,000 shares, (iii) amended the vesting period of options granted under the 2003 Plan, from a six-month vesting period to 25% per year, beginning on the first anniversary date of the grant, and (iv) provided for acceleration of vesting under certain conditions. The exercise price of options to be granted under the 2003 Plan continued to equal to the closing trade price on the date prior to the grant date. The 2003 Plan continued to provide for the issuance to each Eligible Director a number of shares of the Company’s Common Stock in lieu of 65% or 100% (based on option elected by each director) of the fee payable to the Eligible Director for services rendered as a member of the Board. The number of shares issued is determined at 75% of the market value as defined in the 2003 Plan (the Company recognizes 100% of the market value of the shares issued). The number of shares of the Company’s Common Stock authorized under the 2003 Plan is 1,600,000. At December 31, 2022, the 2003 Plan had available for issuance 448,534 shares.

The Company’s 2017 Stock Option Plan authorizes the grant of options to officers and employees of the Company, including any employee who is also a member of the Board, as well as to consultants of the Company. The 2017 Stock Option Plan, as amended (the “2017 Plan”), authorizes an aggregate grant of 1,140,000 NQSOs and Incentive Stock Options (“ISOs”). Consultants of the Company can only be granted NQSOs. The term of each stock option granted under the 2017 Plan shall be fixed by the Compensation and Stock Option Committee (the “Compensation Committee”), but no stock options will be exercisable more than ten years after the grant date, or in the case of an ISO granted to a 10% stockholder, five years after the grant date. The exercise price of any ISO granted under the 2017 Plan to an individual who is not a 10% stockholder at the time of the grant shall not be less than the fair market value of the shares at the time of the grant, and the exercise price of any ISO granted to a 10% stockholder shall not be less than 110% of the fair market value at the time of grant. The exercise price of any NQSOs granted under the plan shall not be less than the fair market value of the shares at the time of grant. At December 31, 2022, the 2017 Plan had available for issuance 353,000 shares.

Stock Options to Employees and Outside Director

On July 21, 2022, the Company issued a NQSO to each of the Company’s seven reelected outside directors for the purchase, under the Company’s 2003 Plan, of up to 10,000 shares of the Company’s Common Stock. The Company’s Executive Vice President (“EVP”) of Strategic Initiatives and also a member of the Company’s Board, was not eligible to receive an option under the 2003 Plan as an employee of the Company. Each NQSO granted is for a contractual term of ten years with one-fourth vesting annually over a four-year period. The exercise price of the NQSO is $5.15 per share, which was equal to the fair market value of the Company’s Common Stock the day preceding the grant date, pursuant to the 2003 Plan.

On July 21, 2022, the Company granted ISOs to certain employees for purchase under the Company’s 2017 Plan, of up to an aggregate of 24,000 shares of the Company’s Common Stock. Each ISO granted is for a contractual term of six years with one-fifth vesting annually over a five-year period. The exercise price of the ISO is $5.34 per share, which was equal to the fair market value of the Company’s Common Stock on the date of grant.

On October 14, 2021, the Company granted ISOs to certain employees for the purchase, under the Company’s 2017 Plan, of up to an aggregate 305,000 shares of the Company’s Common Stock. The total ISOs granted included an ISO for each of the Company’s executive officers for the purchase set forth in his respective ISO Agreement, as follows: 50,000 shares for the CEO; 25,000 shares for the CFO; 20,000 shares for the EVP of Strategic Initiatives; 25,000 shares for the EVP of Waste Treatment Operations; and 25,000 shares for the EVP of Nuclear and Technical Services. Each of the ISOs granted has a contractual term of six years with one-fifth yearly vesting over a five-year period. The exercise price of the ISO is $7.005 per share, which was equal to the fair market value of the Company’s Common Stock on the date of grant.

On July 20, 2021, the Company issued a NQSO to each of the Company’s seven reelected outside directors for the purchase, under the Company’s 2003 Plan, of up to 10,000 shares of the Company’s Common Stock. Each NQSO granted has for a contractual term of ten years with one-fourth vesting annually over a four-year period. The exercise price of the NQSO is $5.93 per share, which was equal to the fair market value of the Company’s Common Stock the day preceding the grant date, pursuant to the 2003 Plan.

On May 4, 2021, the Company issued a NQSO to a new director elected by the Company’s Board, for the purchase, under the Company’s 2003 Plan, of up to 6,000 shares of the Company’s Common Stock. The NQSO granted has a contractual term of ten years with a vesting period of six months. The exercise price of the NQSO is $7.50 per share, which was equal to the fair market value of the Company’s Common Stock the day preceding the grant date, pursuant to the 2003 Plan.

During 2022, the Company issued 16,526 shares of its Common Stock from a cashless exercise of an option for the purchase of 50,000 shares of the Company’s Common Stock at $3.97 per share. Additionally, the Company issued 2,400 shares of its Common Stock from the exercise of an option for the purchase of 2,400 shares of the Company’s Common Stock at $5.50 per share resulting in proceeds of approximately $13,000. During 2021, the Company issued 290 shares of its Common Stock from a cashless exercise of an option for the purchase of 500 shares of the Company’s Common Stock at $3.15 per share.

The Company estimates fair value of stock options using the Black-Scholes valuation model. Assumptions used to estimate the fair value of stock options granted include the exercise price of the award, the expected term, the expected volatility of the Company’s stock over the option’s expected term, the risk-free interest rate over the option’s expected term, and the expected annual dividend yield. The fair value of the options granted during 2022 and 2021 and the related assumptions used in the Black-Scholes option model used to value the options granted were as follows:

SCHEDULE OF STOCK OPTIONS VALUATION ASSUMPTIONS 

The following table summarizes stock-based compensation recognized for fiscal years 2022 and 2021.

SCHEDULE OF SHARE-BASED COMPENSATION, ALLOCATION OF RECOGNIZED PERIOD COSTS 

At December 31, 2022, the Company has approximately $1,293,000 of total unrecognized compensation costs related to unvested options for employee and directors. The weighted average period over which the unrecognized compensation costs are expected to be recognized is approximately 3.6 years.

Stock Options to Consultant

The Company granted a NQSO to Robert Ferguson on July 27, 2017 from the Company’s 2017 Plan for the purchase of up to 100,000 shares of the Company’s Common Stock (“Ferguson Stock Option”) in connection with his work as a consultant to the Company’s Test Bed Initiative (“TBI”) at our PFNWR facility at an exercise price of $3.65 per share, which was the fair market value of the Company’s Common Stock on the date of grant. The term of the Ferguson Stock Option is seven years from the grant date. The vesting of the Ferguson Stock Option is subject to the achievement of three separate milestones by certain dates. The first milestone was met and the 10,000 shares under the first milestone were issued to Robert Ferguson in May 2018. The Company had previously entered into amendments whereby the vesting dates for the second and third milestones for the purchase of up to 30,000 and 60,000 shares of the Company’s Common Stock were extended to December 31, 2022 and December 31, 2023, respectively. The 30,000 shares under the second milestone failed to vest by December 31, 2022 and therefore were forfeited. The Company has not recognized compensation costs (fair value of approximately $39,000 at December 31, 2022) for the remaining 60,000 Ferguson Stock Option under the remaining final milestone since achievement of the performance obligation under the remaining final milestone is uncertain at December 31, 2022. Upon Mr. Ferguson’s death, the remaining Ferguson Stock Option is now held by Mr. Ferguson’s estate.

Summary of Stock Option Plans

The summary of the Company’s total plans as of December 31, 2022 and 2021, and changes during the period then ended are presented as follows:

SCHEDULE OF STOCK OPTIONS ROLL FORWARD 

The summary of the Company’s nonvested options as of December 31, 2022 and changes during the period then ended are presented as follows:

SCHEDULE OF NON VESTED OPTIONS 

Warrant

In connection with a $2,500,000 loan that the Company entered into with Mr. Robert Ferguson (the “Ferguson Loan”) on April 1, 2019, the Company issued a warrant to Mr. Ferguson for the purchase of up to 60,000 shares of our Common Stock at an exercise price of $3.51 per share. The warrant expires on April 1, 2024 and remains outstanding at December 31, 2022. Upon Mr. Ferguson’s death, the warrant is now held by Mr. Ferguson’s estate. The Ferguson Loan was paid-in-full in December 2020.

Common Stock Issued for Services

The Company issued a total of 90,920 and 60,723 shares of our Common Stock in 2022 and 2021, respectively, under our 2003 Plan to our outside directors as compensation for serving on our Board. As a member of the Board, each director elects to receive either 65% or 100% of the director’s fee in shares of our Common Stock. The number of shares received is calculated based on 75% of the fair market value of our Common Stock determined on the business day immediately preceding the date that the quarterly fee is due. The balance of each director’s fee, if any, is payable in cash. The Company recorded approximately $477,000 and $467,000 in compensation expense (included in SG&A expenses) for the twelve months ended December 31, 2022 and 2021, respectively, for the portion of director fees earned in the Company’s Common Stock.

Sale of Common Stock

On September 30, 2021, the Company entered into subscription agreements with certain institutional and retail investors in a registered direct offering, for the sale and issuance of 1,000,000 shares of the Company’s Common Stock (See “Note 7 – Common Stock Subscription Agreements” for a discussion of the issuance of the shares from this direct offering).

Shares Reserved

At December 31, 2022, the Company has reserved approximately 1,018,400 shares of our Common Stock for future issuance under all of the option arrangements.