SHARE-BASED COMPENSATION

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

SHARE-BASED COMPENSATION

NOTE 10 - SHARE-BASED COMPENSATION

Generally accepted accounting principles require share-based payments to employees, including grants of employee stock options, warrants, and common stock to be recognized in the income statement based on their fair values at the date of grant, net of estimated forfeitures.

In total, the Company recorded $353,744 and $658,004 of stock-based compensation for the nine months ended September 30, 2023 and 2022, respectively, including shares to be issued related to consultants and board member stock options and common stock and warrants issued to non-employees. Included in stock subscription payable is accrued stock-based compensation of $1,738,952 and $1,385,208 at September 30, 2023 and December 31, 2022, respectively.

The Company used the Black-Scholes option pricing model to estimate the grant-date fair value of option and warrant awards:

● Expected Dividend Yield - because the Company does not currently pay dividends, the expected dividend yield is zero;

● Expected Volatility in Stock Price - volatility based on the Company’s trading activity was used to determine expected volatility;

● Risk-free Interest Rate - reflects the average rate on a United States Treasury Bond with a maturity equal to the expected term of the option; and

● Expected Life of Award - because we have minimal experience with the exercise of options or warrants for use in determining the expected life of each award, we used the option or warrant’s contractual term as the expected life.

In total for the nine months ended September 30, 2022, the Company recorded $11,370 of share-based compensation expense related to employee and Board Members’ stock options. The Company did not recognize any such share-based compensation for the nine months ended September 30, 2023. There is no unrecognized compensation expense as of September 30, 2023 for non-vested share-based awards to be recognized over a period of less than one year.

Options

During 2004, the Board of Directors of the Company adopted a stock option plan (the “Plan”) and authorized up to 40,000 shares to be issued under the Plan. In April 2009, the Company’s Board of Directors authorized an increase in the number of shares to be issued under the Plan to 100,000 shares and to include the independent Board Members in the Plan in lieu of continuing the previous practice of granting warrants each quarter to independent Board Members for services. At September 30, 2023, there are 22,518 shares of common stock available for issuance under the Plan. In 2014, the Board of Directors adopted an additional stock option plan which provides for an additional 50,000 shares which are all available as of September 30, 2023. In 2019, the Board of Directors adopted an additional stock option plan with provides for 500,000 shares which are all available as of September 30, 2023. The Plan is intended to permit stock options granted to employees to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended (“Incentive Stock Options”). All options granted under the Plan that are not intended to qualify as Incentive Stock Options are deemed to be non-qualified options. Stock options are granted at an exercise price equal to the fair market value of the Company’s common stock on the date of grant, typically vest over periods up to 4 years and are typically exercisable up to 10 years.

There were no options granted during the nine months ended September 30, 2023 and 2022, respectively. Forfeitures are recognized as they occur.

The following table summarizes all stock option activity of the Company for the nine months ended September 30, 2023:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Outstanding, December 31, 2022		265,267		$	19.54		0.51
Granted		-			-		-
Exercised		-			-		-
Forfeited		(223,267	)	$	21.87		-
Outstanding, September 30, 2023		42,000		$	7.17		0.78
Exercisable, September 30, 2023		42,000		$	7.17		0.78

As of September 30, 2023 and 2022, the aggregate intrinsic value of the Company’s outstanding options was minimal. The aggregate intrinsic value will change based on the fair market value of the Company’s common stock.

Warrants

Warrants are issued to third parties as payment for services, debt financing compensation and conversion and in conjunction with the issuance of common stock. The fair value of each common stock warrant issued for services is estimated on the date of grant using the Black-Scholes option pricing model.

The following table represents the Company’s warrant activity for the nine months ended September 30, 2023:

	Number of Shares			Weighted Average Fair Value		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Outstanding, December 31, 2022		37,266			-	$	7.57		1.31
Granted		-			-		-		-
Exercised		-			-		-		-
Forfeited		-			-		-		-
Expired		(14,912	)		-	$	26.09		-
Outstanding, September 30, 2023		22,354			-	$	6.49		1.31
Exercisable, September 30, 2023		22,354			-	$	6.49		1.31