| Stock Based Compensation | NOTE 4: STOCK-BASED COMPENSATION Stock Options Under the 2003 Stock Incentive Plan, as amended (the "2003 Plan"),
until May 2013, options were available to be granted to officers, directors, consultants and employees of the Company and its subsidiaries
to purchase up to 1,500,000 of the Company's common shares. As of February 28, 2021, there were 47,500 options outstanding under the 2003
Plan, under which no additional options may be granted. Under the 2013 Stock Incentive Plan, option prices must be at least 100% of
the fair market value of the common stock at time of grant. For qualified employees, except under certain circumstances specified in
the plan or unless otherwise specified at the discretion of the Board of Directors, no option may be exercised prior to one year after
date of grant, with the balance becoming exercisable in cumulative installments over a three-year period during the term of the option,
and terminating at a stipulated period of time after an employee's termination of employment. During fiscal 2021, the Company granted options to acquire 60,500 shares to employees
exercisable at prices ranging from $3.70 to $4.45 and options to acquire 20,000 shares to the non-employee members of the board of directors
with an exercise price of $3.70. The options granted to employees and directors vest over three years and expire in ten years. The options
granted by the Company during fiscal 2021 had a combined weighted average grant date fair value of $2.20 per share. During fiscal 2020, the Company granted options to acquire 17,500 shares to employees
exercisable at prices ranging from $2.10 to $2.65, options to acquire 20,000 shares to the non-employee members of the board of directors
with an exercise price of $2.65 and options for 200,000 shares to an officer and director exercisable at prices of ranging from $2.45
to $2.65. The options granted to employees and directors vest over three years and expire in ten years. The options granted to the officer
vested upon grant and expire in ten years. The options granted by the Company during fiscal 2020 had a combined weighted average grant
date fair value of $0.34 per share. A summary of the activity of both plans for fiscal 2021 and fiscal 2020 is as follows:
Weighted Average
Stock Options Exercise Price $ Remaining
Outstanding Exercisable Outstanding Exercisable Term - Years
Balance - February 28, 2019 588,000 171,000 $ 1.10 $ 0.85 4.70
Granted 237,500 2.55
Exercised (231,333 ) (0.88 )
Cancelled (2,500 ) (1.17 )
Balance - February 29, 2020 591,667 339,250 $ 1.77 $ 2.03 7.59
Granted 80,500 $ 4.05
Exercised (161,208 ) (1.05 )
Cancelled (2,500 ) (2.55 )
Balance - February 28, 2021 508,459 333,500 $ 2.35 $ 2.17 6.99 The
aggregate intrinsic value of the Company’s vested and exercisable options at February 28, 2021 was $692,490 . For the years ended February
28, 2021 and February 29, 2020, the Company recognized $47,633 and $90,305 in stock based compensation expense for the years then ended,
respectively. Such amounts are included in general and administrative expenses on the statement of operations. Total compensation expense
related to non-vested options not yet recognized as of February 28, 2021 was $185,000 and
will be recognized on a straight-line basis through January 2024. The amount of future stock option compensation expense could be affected
by any future option grants or by any forfeitures. During the year ended February 28, 2021, the Company had net settlement exercises of
stock options, whereby, the optionee did not pay cash for the options but instead received the number of shares equal to the difference
between the exercise price and the market price on the date of exercise. Net settlement exercises during the year ended February 28, 2021
resulted in 104,476 shares issued and 56,732 options cancelled in the settlement of shares issued. Determining the appropriate fair value of the stock-based awards requires the input of
subjective assumptions, including the fair value of the Company’s common stock, and for stock options, the expected life of the
option, and the expected stock price volatility. The Company uses the Black-Scholes option pricing model to value its stock option awards.
The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent
uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions,
stock-based compensation expense could be materially different for future awards. The expected term of the options is estimated based on the Company’s historical exercise
rate. The expected life of awards that vest immediately use the contractual maturity since they are vested when issued. For stock price
volatility, the Company uses its expected volatility of the price of the Company’s common stock based on historical activity. The
risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected life of the option at the grant-date. The weighted-average fair value of options has been estimated on the date of
grant using the Black-Scholes options-pricing model. The weighted-average Black-Scholes assumptions are as follows:
Fiscal Year Ended
February 28, February 29,
Expected life 5 - 8 years 1 - 8 years
Risk free interest rate 0.46% - 0.78% 1.58% - 2.05%
Expected volatility 48.88% - 58.63% 27.46% - 32.24%
Expected dividend yield 0% 0% For the years ended February 28, 2021 and February 29, 2020, net income and earnings per
share reflect the actual deduction for stock-based compensation expense. The impact of applying ASC 718 was $47,633 and $90,305 in additional
compensation expense for the years then ended, respectively. Such amount is included in general and administrative expenses on the statement
of operations. The expense for stock-based compensation is a non-cash expense item. |
