STOCK OPTION AGREEMENTS AND TRANSACTIONS

12 Months Ended

Dec. 31, 2022

STOCK AND STOCK OPTION PLANS

STOCK OPTION AGREEMENTS AND TRANSACTIONS

NOTE 8. - STOCK OPTION AGREEMENTS AND TRANSACTIONS

The Company grants stock options to its key employees and independent service providers as it deems appropriate. Most options expire from five to ten years after the grant date.

Option Agreements - The Company’s Board approved stock option agreements with consultants, an employee for a performance-based award, and a member of the Board of which options for an aggregate of 27,354 common shares are outstanding at December 31, 2022 with an average exercise price of $12.04 per share. At December 31, 2022, options for 9,354 shares are vested as the performance based award has been reached.

On April 6, 2021, the Company granted a stock option to purchase a total of 2,667 common shares at an exercise price of $14.438 per share to a former executive of the Company who consults with the Company. The individual forfeited an option grant of 6,307 common shares from the 2009 Plan.

On April 19, 2021, the Company issued 10,000 performance-based stock options at $18.375 per share to an executive of the Company. Certain revenue targets must be made to grant the options in three tranches of 3,333, 3,333, and 3,334 shares each. The unrecognized compensation expense for these options is approximately $135,800 at December 31, 2021, and has been fully recognized as of December 31, 2022.

The remaining stock options issued during the year ended December 31, 2021 included in the table below relate to options issued to employees as compensation expense.

All stock options issued in 2022 were issued to employees as compensation expense.

On July 29, 2022, an executive officer exercised 5,334 options at a price of $3.00 per share.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model based on the following assumptions. Volatility is based on the Company’s historical volatility. The expected life of the options was determined using the simplified method for plain vanilla options as stated in FASB ASC 718 to improve the accuracy of this assumption while simplifying record keeping requirements until more detailed information about the Company’s exercise behavior is available. The risk-free rate for the life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

The following assumptions were used for the years ended December 31, 2022 and 2021

	2022			2021
Risk free interest rate	1.26% to 3.35%			0.16% to 0.64%
Expected dividend yield		0	%		0	%
Expected stock price volatility	110% to 130%			100% to 140%
Expected life of options	2.75 years			1.25 to 5.25 years

The following is a summary of stock option activity, including qualified and non-qualified options for the years ended December 31, 2021 and 2022

	Number of			Weighted		Remaining	Aggregate
	Options			Average		Contractual	Intrinsic
	Outstanding			Exercise Price		Term	Value
Outstanding at December 31, 2020		165,768		$	3.98
Granted		23,429		$	15.98
Exercised		(31,858	)	$	2.78
Expired		(600	)	$	7.13
Forfeited		(13,312	)	$	7.20
Outstanding at December 31, 2021		143,427		$	5.85	2.8 years		289,700
Granted		1,403		$	9.48
Exercised		(5,668	)	$	3.00
Expired		(7,373	)	$	4.87
Outstanding at December 31, 2022		131,789		$	6.05
Vested or expected to vest at December 31, 2022		131,789		$	6.05	2.8 years		289,700
Exercisable at December 31, 2022		131,655		$	6.04	2.8 years		289,700

At December 31, 2022, there was approximately $1,428 of total unrecognized compensation cost related to outstanding non-vested options.  The balance was $135,800 at December 31, 2021.

The weighted average fair value of options granted was $9.48 and $15.98 per share for the years ended December 31, 2022 and 2021, respectively. The exercise price for all options granted equaled or exceeded the market value of the Company’s common stock on the date of grant.