NOTE 8 – STOCK OPTIONS AND RESTRICTED STOCK UNITS

In 2016 to compensate officers, directors and other key service providers with equity grants, the Board approved the 2016 Omnibus Equity Incentive Plan (“2016 Plan”), which initially allowed for 4,000 shares of common stock, stock options, stock rights (restricted stock units), or stock appreciation rights to be granted by the Board in its discretion. This authorized amount was increased multiple times by Board resolution, most recently to 200,000 shares on January 13, 2022. As of December 31, 2022, there are 25,000 shares available under the 2016 Plan for future issuance; however, the Board may increase the authorized shares under the 2016 Plan each year to an amount equal to 5% of the total issued and outstanding common shares of the Company or such other amount in its reasonable discretion. The Board has indicated that they intend to increase the authorized shares under the 2016 Plan in 2023.

The Company issued 150,000 stock options to purchase common stock to officers and directors of the Company during 2022. These options have a 10 year term. The options have the following vesting schedules:

SCHEDULE OF VESTED DESCRIPTION 

A summary of stock option activity and related information during the years ended December 31, 2022 and 2021 is as follows:

SUMMARY OF STOCK OPTION ACTIVITY

The Company recorded $670,962 and $75,692 of stock-based compensation expense which is included in compensation and related expenses for the years ended December 31, 2022 and 2021, respectively, on the consolidated statement of operations.

The aggregate intrinsic value of options is the difference between the fair market value of the Company’s closing price of its common stock at each reporting date, less the exercise price multiplied by the number of options granted, which was $0 at December 31, 2022.

As of December 31, 2022, there was unrecognized stock-based compensation of $638,237 which is expected to be expensed through March 2024 based on the option vesting requirements. The weighted average fair value of options granted was $7.82 per share for the year ended December 31, 2022.

We estimate the fair value of stock-based awards on the date of grant using the Black-Scholes option pricing model using the fair market value of our common stock on the date of grant and a number of other assumptions. These assumptions include estimates regarding the expected term of the awards, estimates of the stock volatility over a duration that approximates the expected term of the awards, estimates of the risk-free rate, and estimates of expected dividend rates.

The assumptions that were used in Black-Scholes option pricing model for the year ended December 31, 2022 and 2021 were as follows:

SCHEDULE OF FAIR VALUE OF STOCK OPTIONS GRANTED USING THE ASSUMPTIONS