Note 5 - Share-based Compensation Plans

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Text Block]

(5) Share-Based Compensation Plans

The Company adopted the 2020 Equity Incentive Plan ("2020 Plan") on March 3, 2020. Under the terms of the 2020 Plan all of the Company’s employees, officers, directors, consultants and advisors are eligible to be granted options, restricted stock awards, or other stock-based awards. Some outstanding options are non-statutory stock options; some are incentive stock options. All options granted are exercisable at the fair market value of the stock on the date of grant and expire ten years from the date of grant. The options granted to employees generally vest in equal annual installments over a five-year period. The options granted to directors generally vest immediately on date of grant.

Under the 2020 Plan a total of 1,500,000 shares of common stock are available for issuance, of which 979,500 shares remain available for grant as of December 31, 2022.

A summary of stock option activity as of December 31, 2022 and changes during the year then ended is presented below:

				Weighted		Weighted
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Shares			Price		Life (years)		Value
Outstanding at beginning of year		839,400		$	2.20
Granted		248,000		$	3.11
Exercised		(109,700	)	$	1.78
Forfeited		(15,400	)	$	2.88
Expired		(900	)	$	1.68
Outstanding at end of year		961,400		$	2.47		6.14	$	2,375,619

Options exercisable at year-end		498,300		$	2.08		4.18	$	1,064,670

109,700 options were exercised during fiscal 2022 and 248,000 options were granted during fiscal 2022.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The following table presents the annualized weighted average values of the significant assumptions used to estimate the fair values of the options granted during 2022 and 2021:

	2022				2021
Risk-free interest rate		1.55%	-	2.84%		.50%	-	1.34%
Expected life in years		6	-	7		6	-	7
Expected volatility			54%				54%
Expected dividend yield			0				0
Weighted average fair value of grants	$		3.11		$		1.72

All options are granted with an exercise price equal to the fair market value of the underlying common stock on the date of grant.

The Company recognized $250,359 and $174,124 as stock based compensation expense in 2022 and 2021, respectively. As of December 31, 2022, there was $565,977 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plan; that cost is expected to be recognized over a weighted average period of 2.31 years.

CPS TECHNOLOGIES CORP/DE/ 10-K