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9.
Stock Compensation Plan
The
purpose of the 2021 Incentive Plan is to advance the interests of the Company by affording certain employees and Directors of the Company
and key consultants and advisors an opportunity to acquire or increase their proprietary interests in the Company. The 2021 Incentive
Plan authorizes the grant of stock options (incentive and non-statutory), stock appreciation rights and restricted stock. Options are
granted at the fair market value of the Company’s stock on the date of grant. Options can generally vest either immediately or
over a period of up to three years from their respective grant dates and expire 10 years from the date of grant.
Recipients
of stock awards under our 2021 Incentive Plan become the owner of record of the stock immediately upon grant, which may be subject to
certain restrictions. The balance of unvested restricted stock will be forfeited and automatically transferred back to us at no cost
upon the termination of the recipient’s employment. Upon vesting of restricted stock that is made to recipients who are employees,
the recipient has the option to settle minimum withholding taxes by electing to have us withhold otherwise deliverable shares having
a fair market value equal to the required tax obligations (“net-settlement”). The net-settlement shares are then immediately
cancelled and retired and reduce the shares available for issuance under the Company’s 2021 Incentive Plan.
The
Company uses the Black-Scholes Pricing Option Pricing Model to estimate the fair value of stock-based awards on the date of grant. The
assumptions employed in the calculation of the fair value of share-based compensation expense were calculated as follows for all years
presented:
| |
● |
Expected
dividend yield — zero based on the Company does not plan to issue dividends. |
| |
|
|
| |
● |
Expected
volatility — based on the Company’s historical market price at consistent points in a period equal to the expected life
of the options. |
| |
|
|
| |
● |
Risk-free
interest rate — based on the US Treasury yield curve in effect at the time of grant. |
| |
|
|
| |
● |
Expected
life of options — based on the simplified method of estimating the expected life for current year grants. In prior year, 2022, it was based on the Company’s historical life of options exercised, considering the contractual
terms of the grants, vesting schedules and expectations of future employee behavior. |
| |
|
|
| |
● |
The company accounts for forfeitures as they occur. |
The
following table summarizes the assumptions used to estimate the fair value of stock options granted during the years ended December 31,
2023 and 2022:
Summary
of Assumptions Used to Estimate the Fair Value of Stock Options Granted
| |
|
2023 |
|
|
2022 |
|
| |
|
|
|
|
|
|
| Expected dividend yield |
|
|
0 |
% |
|
|
0 |
% |
| Weighted-average expected volatility |
|
|
119-152
|
% |
|
|
137-150 |
% |
| Weighted-average risk-free interest rate |
|
|
3.93-4.84
|
% |
|
|
1.28-3.09 |
% |
| Expected life of options |
|
|
5.5-6.25
years |
|
|
|
10 years |
|
Total
compensation cost related to stock options was $550,082 and $742,203 for the years ended December 31, 2023 and 2022, respectively. As
of December 31, 2023, there was $287,858 of unrecognized compensation costs related to stock options, which is expected to be recognized
over a weighted average period of less than one year.
The
following table represents stock option activity for the year ended December 31, 2023:
Summary
of Stock Option Activity
| |
|
Number of Shares |
|
|
Weighted Average Exercise Price |
|
|
Weighted Average Remaining Contractual Term (In Years) |
|
|
Aggregate Intrinsic Value(1) |
|
| Outstanding at December 31, 2022 |
|
|
139,090 |
|
|
$ |
41.49 |
|
|
|
7.85 |
|
|
$ |
- |
|
| Granted |
|
|
144,204 |
|
|
|
5.11 |
|
|
|
— |
|
|
$ |
— |
|
| Exercised |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
— |
|
| Forfeited |
|
|
(38,561 |
) |
|
|
52.94 |
|
|
|
— |
|
|
$ |
— |
|
| Outstanding at December 31, 2023 |
|
|
244,733 |
|
|
$ |
20.17 |
|
|
|
8.73 |
|
|
$ |
74,559 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Exercisable at December 31, 2023 |
|
|
176,559 |
|
|
$ |
25.02 |
|
|
|
8.30 |
|
|
$ |
48,063 |
|
| (1) |
|
The aggregate intrinsic
value is calculated as the difference between the exercise price of the underlying stock option awards and the closing market price of
our common stock as of December 31, 2022, and December 31, 2023, respectively. |
The
following table summarizes the weighted average grant date fair value of stock options granted per share, the total intrinsic value of
stock options exercised and the grant date fair value of stock options that vested during the years ended December 31, 2023 and 2022:
Summary
of Weighted Average Grant Fair Value of Stock Options
| |
|
2023 |
|
|
2022 |
|
| Weighted average grant date fair value of stock options granted per share |
|
$ |
4.59 |
|
|
$ |
19.44 |
|
| Intrinsic value of stock options exercised |
|
$ |
- |
|
|
$ |
— |
|
| Grant date fair value of stock options that vested |
|
$ |
291,401 |
|
|
$ |
9,395 |
|
The
following table represents restricted stock activity for the year ended December 31, 2023:
Schedule
of Restricted Stock Activity
| |
|
Number of Shares |
|
|
Weighted Average Grant-Date Fair Value |
|
| Non-vested restricted stock at beginning of year |
|
|
- |
|
|
$ |
- |
|
| Granted |
|
|
140,000 |
|
|
|
3.37 |
|
| Vested |
|
|
(134,000 |
) |
|
|
3.34 |
|
| Forfeited |
|
|
— |
|
|
|
— |
|
| Non-vested restricted stock at end of year |
|
|
6,000 |
|
|
|
3.37 |
|
The
total fair value of restricted stock vested in 2023 was $451,580.
For the year ended December 31, 2023, share-based compensation expense under the plan for restricted stock was about $466,745.
There was no
restricted stock granted in the year 2022. As of December 31, 2023, there was $5,055
of unrecognized compensation expense related to non-vested restricted shares. This cost is expected to be recognized over a
weighted-average period of one month.
|