Equity Based Compensation

6 Months Ended

Jun. 30, 2023

Equity-Based Compensation [Abstract]

EQUITY BASED COMPENSATION

8. EQUITY BASED COMPENSATION

As of June 30, 2023, there was $834,668 of unrecognized equity-based compensation expense recorded in prepaid expenses and other assets. The estimated expense for various marketing and advertising services in exchange for common stock, for the periods subsequent to June 30, 2023 is as follows:

	Advertising and Marketing Expense
2023		156,500
2024		313,000
2025		313,000
2026		52,168
	$	834,668

Restricted Stock Units

On April 24, 2023 the Company granted 319,023 restricted stock units to its Chief Executive Officer. On May 11, 2023 the Company granted 170,958 restricted stock units to its Executive Vice President Sales and Marketing. On May 25, 2023, the Company granted 124,902 restricted stock units to its Chief Financial Officer. Restricted stock units represent the right to receive one share of common stock from the Company upon vesting. These restricted stock units had a vesting period that coincided with the company filing its Form 10-K for the year ended on December 31, 2023 and had a stipulation that each of the Executives attained performance objectives.

Restricted stock unit activity for the six months ended June 30, 2023 was as follows:

			Weighted
			Average
			Remaining
			Contractual
	Number of		Term
	RSUs		(Years)
Outstanding at December 31, 2022		-		-
Granted		614,883		0.9
Vested or released		-		-
Forfeited		-		-
Outstanding at June 30, 2023		614,883		0.7

Shares of Restricted Stock

During the first quarter of 2023, 6,666 shares of restricted stock from previous periods were forfeited by employees that terminated their employment. There was a new grant of 500,000 shares of restricted stock which relates to the settlement reached with a previous employee, as further disclosed in Note 12. On April 24, 2023 the Company granted 463,917 restricted stock to its Chief Executive Officer. On May 11, 2023 the Company granted 380,952 restricted stock to its Executive Vice President Sales and Marketing. On May 25, 2023, the Company granted 196,463 restricted stock to its Chief Financial Officer. In addition, the Company Board of Directors were granted 100,000 shares of restricted stock. Stock compensation expense related to restricted stock issuances for the three and six month periods ended June 30, 2023 was $304,558 and $493,058, respectively. Stock compensation expense related to restricted stock for the three and six month periods ended June 30, 2022 was $675,339 and $2,277,136, respectively. Total unrecognized equity-based compensation expense is $116,441, net of known forfeitures, related to restricted stock as of June 30, 2023.

Restricted stock activity during the six-month period ended June 30, 2023 was as follows:

				Weighted
				Average
	Number of			Remaining
	Shares of			Vesting
	Restricted			Term
	Stock			(Years)
Outstanding at December 31, 2022		6,666			0.9
Granted		1,641,332			0.6
Vested or released		(25,000	)		-
Forfeited		(6,666	)		-
Outstanding at June 30, 2023		1,616,332			0.3

Vendor Stock Awards

Vendor stock award activity subject to revenue-related performance conditions during the six-month period ended June 30, 2023 was as follows:

	Number of Shares of Vendor Stock Awards		Weighted Average Remaining Vesting Term (Years)
Outstanding at December 31, 2022		1,030,000		2.25
Granted		-		-
Vested		-		-
Expired		-		-
Outstanding at June 30, 2023		1,030,000		1.75

For stock awards that contain revenue-related performance conditions, compensation cost is recognized in the period in which it becomes probable that the performance condition will be satisfied. During the second quarter of 2023, it has become not probable that the revenue-related performance will be achieved. Accordingly, the Company has reversed the $15,500 of expense recorded in the first quarter and has not booked any expense in the second quarter. Stock compensation expense related to vendor stock awards subject to revenue-related performance conditions totaled $0 and $0 for the six months ended June 30, 2023 and 2022, respectively.

Stock Options

Stock option activity as of and during the six-month period ended June 30, 2023 was as follows:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contract Term (Years)
Outstanding at December 31, 2022		1,574,892			9.67		8.94
Granted		1,500,000			0.50		5.00
Exercised		-			-		-
Forfeited		(3,333	)		2.78		-
Outstanding at June 30, 2023		3,071,559			5.20		6.72
Exercisable at June 30, 2023		71,559			3.03		9.17

Stock compensation expense related to options issued amounted to $138,791 and $173,242 for the six months ended June 30, 2023 and 2022 respectively. Total unrecognized equity-based compensation expense is $38,045, net of known forfeitures, related to stock options as of June 30, 2023.

Warrants

During the first half of 2023, no warrants from previous periods were exercised or forfeited. As described above, 3,143,969 warrants were granted as part of the Rights Offering, as disclosed in Note 7.

	Number of Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contract Term (Years)
Outstanding at December 31, 2022		110,000		12.00		3.71
Granted		3,143,969		1.25		5.00
Exercised		-				-
Forfeited						-
Outstanding at June 30, 2023		3,253,969		1.61		4.66

The Company uses the Black-Scholes option-pricing model to estimate the fair value of equity-based awards. The inputs for the Black-Scholes valuation model require management’s significant assumptions. Prior to the Company’s IPO, the price per share of common stock was determined by the Company’s board based on recent prices of common stock sold in private offerings. Subsequent to the IPO, the price per share of common stock is determined by using the closing market price on The NYSE American stock exchange on the grant date. The risk-free interest rates, ranging from 0.02% to 4.45%, are based on the rate for U.S. Treasury securities at the date of grant with maturity dates approximately equal to the expected life of the awards at the grant date. The expected term for employee and nonemployee awards ranged from 3 to 10 years based on industry data, vesting period, contractual period, among other factors. The expected volatility was estimated at 175% based on historical volatility information of peer companies that are publicly available in combination with the Company’s calculated volatility since being publicly traded. The Company does not expect to pay dividends. For awards with a performance condition, stock compensation is recognized over the requisite service period if it is probable that the performance condition will be satisfied.