NOTE 7 – STOCK OPTIONS

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 550,000 shares on May 23, 2023. As of December 31, 2023, there are 149,700 stock options issued, 269,102 restricted common shares issued, and 131,198 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 Company has two prior equity plans still active: the 2014 Employee Stock Option Plan and the 2014 Founders Stock Option Plan (the “Legacy Plans”), which have a total of 605 and 306 options issued thereunder, respectively, and have 1,395 and 1,694 shares available for future issuance, respectively.

The Company did not issue any stock options during the year ended December 31, 2023; however, it did issue 269,102 shares of restricted stock under the 2016 Plan in May 2023 (see “Common Stock” above).

A summary of stock option activity and related information during the year ended December 31, 2023 is as follows:

SUMMARY OF STOCK OPTION ACTIVITY

The Company recorded $402,577 and $1,534,964 of stock-based compensation expense which is included in compensation and related expenses for the year ended December 31, 2023 and 2022, 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, 2023.

As of December 31, 2023, there was unrecognized stock-based compensation of $166,417 which is expected to be expensed through March 2026 based on the restricted stock vesting requirements.

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.