Stock-based Plans and Stock-based Compensation

12 Months Ended

Dec. 31, 2023

Stock-based Plans And Stock-based Compensation

Stock-based Plans and Stock-based Compensation

9. Stock-based Plans and Stock-based Compensation

Stock-based Plans

We have the 2010 Incentive Stock Option Plan, the 2013 Incentive Stock Option Plan, the 2016 Stock Incentive Plan and the 2022 Equity Incentive Plan under which we have granted stock options to our directors, officers and employees. As of December 31, 2023, 7,297,355 shares were authorized under the plans and 30,056,707 shares were available for future grant.

We believe that such awards better align the interests of our directors, officers and employees with those of our shareholders. Option awards are generally granted with an exercise price that equals the fair market value of our stock at the date of grant. These option awards generally vest based on four years of continuous service and have 10-year contractual terms.

The following table summarizes stock option activity under our stock-based plans as of and for the years ended December 31, 2023 and 2022:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2021		6,246,466		$	1.20		7.17	$	4,056,639
Granted		1,375,000		$	1.02		—	$	—
Exercised		—		$	—		—	$	—
Forfeit/canceled		(330,623	)	$	1.09		—	$	—
Expired		(599,627	)	$	0.98		—	$	—
Outstanding at December 31, 2022		6,691,216		$	1.19		5.86	$	2,086,829
Granted		2,678,500		$	0.79		—	$	—
Exercised		—		$	—		—	$	—
Forfeit/canceled		(329,893	)	$	1.54		—	$	—
Expired		(1,742,468	)	$	1.72		—	$	—
Outstanding at December 31, 2023		7,297,355		$	0.90		7.28	$	6,567,620
Expected to vest at December 31, 2023		3,486,670		$	0.91		5.13	$	3,172,870
Exercisable at December 31, 2023		3,486,670		$	0.91		5.13	$	3,172,870
Unrecognized expense at December 31, 2023	$	2,180,739

The aggregate intrinsic value of options was calculated as the difference between the exercise price of the underlying awards and the quoted price of our common stock. At December 31, 2023, options to purchase 4,057,500 shares of common stock were in-the-money.

The weighted average grant-date fair value of options granted during the years 2023 and 2022 was $0.90 and $1.19, respectively.

2022

On March 29, 2022, the Company granted one employee 150,000 options to purchase shares of the Company’s common stock at the closing price as of March 29, 2022, of $0.8289 per share. The option shares will vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter, and are exercisable until March 29, 2032. The total estimated value using the Black-Scholes Model, based on a volatility rate of 72.33% and an option fair value of $0.54 was $81,035.

On May 16, 2022, the Company granted three employees 45,000 options to purchase shares of the Company’s common stock at the closing price as of May 16, 2022, of $0.97 per share. The option shares will vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter, and are exercisable until May 16, 2032. The total estimated value using the Black-Scholes Model, based on a volatility rate of 73.45% and an option fair value of $0.642608 was $28,917.

On September 22, 2022, the Company granted one employee 1,000,000 options to purchase shares of the Company’s common stock at the closing price as of September 2022, of $0.98 per share. The option shares will vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter, and are exercisable until September 29, 2032. The total estimated value using the Black-Scholes Model, based on a volatility rate of 76.15% and an option fair value of $0.697499 was $697,499.

On December 14, 2022, the Company granted one employee 180,000 options to purchase shares of the Company’s common stock at the closing price as of December 14, 2022, of $1.44 per share. The option shares will vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter, and are exercisable until September 29, 2032. The total estimated value using the Black-Scholes Model, based on a volatility rate of 75.76% and an option fair value of $1.039857 was $187,174.

In the twelve months ended December 31, 2022, the company recorded stock-based plans amortized expense of $587,610.

In the twelve months ended December 31, 2022 we had a total stock-based compensation expense of $1,457,570, this is comprised of $260,010 in restricted stock unit compensation expense, $587,610 of stock-based compensation expense and $609,950 of stock-based compensation expense in connection with the exercise of investor-based warrants

2023

On May 11, 2023 the Company granted three employees 295,000 options to purchase shares of the Company’s common stock at the closing price as of May 11, 2023 of $0.98 per share. The option shares will vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter, and are exercisable until May 16, 2033. The total estimated value using the Black-Scholes Model, based on a volatility rate of 75.76% and an option fair value of $0.705183 was $208,029.

On July 14, 2023 the Company granted one employees 1,000,000 options to purchase shares of the Company’s common stock at the closing price as of July 14, 2023 of $0.85 per share. The option shares will vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter, and are exercisable until July 14, 2033. The total estimated value using the Black-Scholes Model, based on a volatility rate of 74.55% and an option fair value of $0.5590 was $605,383.

On July 17, 2023 the Company granted one employees 700,000 options to purchase shares of the Company’s common stock at the closing price as of July 17, 2023 of $0.79 per share. The option shares will vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter, and are exercisable until July 17, 2033. The total estimated value using the Black-Scholes Model, based on a volatility rate of 74.57% and an option fair value of $0.5713 was $396,441.

On August 25, 2023 he Company granted four employees 650,000 options to purchase shares of the Company’s common stock at the closing price as of August 25, 2023 of $0.65 per share. The option shares will vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter, and are exercisable until August 25, 2033. The total estimated value using the Black-Scholes Model, based on a volatility rate of 64.81% and an option fair value of $0.4257 was $285,773.

On November 30, 2023, the Company granted five employees 33,500 options to purchase shares of the Company’s common stock at the closing price as of November 30, 2023 of $0.3505 per share. The option shares will vest 25% on the first anniversary of the grant, then equally in 36 monthly installments thereafter, and are exercisable until November 30, 2033. The total estimated value using the Black-Scholes Model, based on a volatility rate of 83.03% and an option fair value of $0.295407 was $9,896.

In the twelve months ended December 31, 2023 we had a total stock-based compensation expense of $691,674, this is comprised of $260,007 in restricted stock unit compensation expense, and $2,502,571 of stock-based compensation expense in connection with the exercise of investor-based warrants

Stock-based Compensation Expense

The impact on our results of operations of recording stock-based compensation expense for the years ended December 31, 2023 and 2022 was as follows:

	Years Ended
	December 31,
	2023		2022
General and administrative	$	161,593	$	262,060
Sales and marketing		359,253		113,838
Engineering, research, and development		170,828		211,712
	$	691,674	$	587,610

As of December 31, 2023, there was approximately $2,180,739 of unearned stock-based compensation that will be expensed from 2024 through 2028. If there are any modifications or cancellations of the underlying unvested awards, we may be required to accelerate, increase or cancel all or a portion of the remaining unearned stock-based compensation expense. Future unearned stock-based compensation will increase to the extent we grant additional equity awards.

Stock Option Valuation Assumptions

We calculated the fair value of each stock option award on the date of grant using the Black-Scholes option pricing model. The ranges of assumptions were used for the years ended December 31, 2023 and 2022:

	Years Ended
	December 31,
	2023			2022
Risk-free interest rate		0.34% to 0.44	%		0.25% to 0.38	%
Expected life (years)		7.00			7.00
Expected dividend yield		—			—
Expected volatility		72.88% to 83.03	%		72.33% to 76.15	%

The risk-free interest rate assumption is based upon published interest rates appropriate for the expected life of our employee stock options.

The expected life of the stock options represents the weighted-average period that the stock options are expected to remain outstanding and was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of its stock-based awards.

The dividend yield assumption is based on our history of not paying dividends and no future expectations of dividend payouts.

The expected volatility in 2023 and 2022 is based on the historical publicly traded price of our common stock.

Restricted stock units

The following table summarizes restricted stock unit activity under our stock-based plans as of and for the years ended December 31, 2023 and 2022:

	Shares			Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2021		1,685,141		$	1.18		—	$	1,180,407
Awarded		244,792		$	1.06		—	$	260,579
Outstanding at December 31, 2022		1,929,933		$	1.04		—	$	2,018,811
Awarded		414,104		$	0.63		—	$	260,886
Released		(545,012	)	$	1		—	$	(588,613	)
Outstanding at December 31, 2023		1,799,025		$	0.94		—	$	1,691,084
Vested at December 31, 2023		1,799,025		$	—		—	$	1,691,084
Unvested at December 31, 2023		—		$	—		—	$	—
Unrecognized expense at December 31, 2023	$	—

2022

On March 29, 2022, the Company granted four independent directors a total of 78,420 restricted stock units. The units were valued at $65,002 or $0.829 per share, based on the closing stock price on the date of the grant. All units vested immediately. The shares of common stock associated with the restricted stock units will be issued to each director upon the earliest to occur of (A) March 29, 2025, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.

On May 16, 2022, the Company granted four independent directors a total of 54,168 restricted stock units. The units were valued at $65,002 or $1.20 per share, based on the closing stock price on the date of the grant. All units vested immediately. The shares of common stock associated with the restricted stock units will be issued to each director upon the earliest to occur of (A) May 16, 2025 (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.

On September 30, 2022, the Company granted four independent directors a total of 65,100 restricted stock units. The units were valued at $65,002 or $.9985 per share, based on the closing stock price on the date of the grant. All units vested immediately. The shares of common stock associated with the restricted stock units will be issued to each director upon the earliest to occur of (A) September 30, 2025 (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.

On December 31, 2022 the Company granted four independent directors a total of 47,104 restricted stock units. The units were valued at $65,004 or $1.38 per share, based on the closing stock price on the date of the grant. All units vested immediately. The shares of common stock associated with the restricted stock units will be issued to each director upon the earliest to occur of (A) December 31, 2025, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.

In the twelve months ended December 31, 2022, the company recorded $260,010 in restricted stock units as board compensation.

2023

On March 31, 2023, the Company granted four independent directors a total of 61,342 restricted stock units. The units were valued at $65,002 or $1.05 per share, based on the closing stock price on the date of the grant. All units vested immediately. The shares of common stock associated with the restricted stock units will be issued to each director upon the earliest to occur of (A) March 31, 2026, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.

On June 30, 2023, the Company granted four independent directors a total of 80,160 restricted stock units. The units were valued at $65,003 or $0.81 per share, based on the closing stock price on the date of the grant. All units vest immediately. The shares of common stock associated with the restricted stock units will be issued to each director upon the earliest to occur of (A) June 30, 2026, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.

On September 30, 2023, the Company granted four independent directors a total of 101,564 restricted stock units. The units were valued at $65,001 or $.64 per share, based on the closing stock price on the date of the grant. All units vest immediately. The shares of common stock associated with the restricted stock units will be issued to each director upon the earliest to occur of (A) September 30,2026, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.

On December 31, 2023 the Company granted four independent directors a total of 171,056 restricted stock units. The units were valued at $65,001 or $.38 per share, based on the closing stock price on the date of the grant. All units vested immediately. The shares of common stock associated with the restricted stock units will be issued to each director upon the earliest to occur of (A) December 31, 2025, (B) a change in control of the Company, and (C) the termination of the director’s service with the Company.

In the twelve months ended December 31, 2023, the company recorded $260,007 in restricted stock units as board compensation.

Restricted Stock Unit Compensation Expense

The impact on our results of operations of recording stock-based compensation expense for years ended December 31, 2023 and 2022 was as follows:

	Years Ended
	December 31,
	2023		2022
General and administrative	$	260,007	$	260,010
Sales and Marketing		—		—
	$	260,007	$	260,010