Note 7 – Stock-Based Compensation

a) Warrants

The following table summarizes the changes in warrants outstanding of the Company during the nine-month period ended September 30, 2021:

Effective January 1, 2021, the Company granted warrants to purchase 125,000 shares of common stock to a Company employee for services to the Company. These warrants vest on January 1, 2022 (subject to continued employment through such date) and expire on January 1, 2027, with an exercise price of $3.95 per share. The Company has calculated the estimated fair market value of these warrants at $242,877, using the Black-Scholes model and the following assumptions: term 3.5 years, stock price $3.80, exercise price $3.95, 74.53% volatility, 0.50% risk free rate, and no forfeiture rate.

Effective February 1, 2021, the Company granted warrants to purchase 185,000 shares of common stock to a Company employee for services to the Company. These warrants vest on February 1, 2022 (subject to continued employment through such date) and expire on February 1, 2027, with an exercise price of $4.90 per share. The Company has calculated the estimated fair market value of these warrants at $459,352, using the Black-Scholes model and the following assumptions: term 3.5 years, stock price $4.80, exercise price $4.90, 75.03% volatility, 0.59% risk free rate, and no forfeiture rate.

Below is a table summarizing the warrants issued and outstanding as of September 30, 2021, which have an aggregate weighted average remaining contractual life of 4.21 years.

Stock-based compensation expense related to warrants of $524,780 and $56,127 was recorded in the nine months ended September 30, 2021 and September 30, 2020, respectively. Total remaining unrecognized compensation cost related to non-vested warrants is $216,014 and is expected to be recognized over a period of 0.34 years. As of September 30, 2021, the total intrinsic value of warrants outstanding was $78,750.

b) Options

The following table summarizes the changes in options outstanding of the Company during the nine-month period ended September 30, 2021:

Effective May 20, 2021, the Company granted stock options to purchase 40,000 shares of common stock to a Company employee in exchange for services provided to the Company. These options vest on May 20, 2022 and expire five years after the vesting date, with an exercise price of $3.60 per share. The Company has calculated the estimated fair market value of these options at $73,641, using the Black-Scholes model and the following assumptions: term 3.5 years, stock price $3.50, exercise price $3.60, 76.16% volatility, 0.58% risk free rate, and no forfeiture rate.

On July 14, 2021, the Company amended the terms of certain outstanding options granted pursuant to the 2011 Equity Incentive Plan such that (i) the expiration date for outstanding options to purchase up to an aggregate of 292,000 shares of the Company’s common stock, granted on July 23, 2015, was extended from five years and six months after vesting to ten years from the date of grant, or an expiration date of July 23, 2025, (ii) the expiration date for outstanding options to purchase up to an aggregate of 6,367 shares of the Company’s common stock, granted on March 20, 2013, was extended from six years after vesting to ten years from the date of grant, or an expiration date of March 20, 2023, and (iii) the expiration date for outstanding options to purchase up to an aggregate of 8,151 shares of the Company’s common stock, granted September 2, 2013, was extended from six years after vesting to ten years from the date of grant, or an expiration date of September 2, 2023. As a result of these amendments $452,433 was recorded as additional options expense.

Effective August 3, 2021, the Company approved the granting of options under the 2015 Stock Incentive Plan vesting upon achievement of certain corporate goals (see additional details in Note 8 (h)). Pursuant to this approval, the Company granted stock options to purchase an aggregate of 926,640 shares of common stock to various personnel (including directors, executives, members of management and employees of the Company and/or its subsidiaries) in exchange for services provided to the Company and/or its subsidiaries. These options vest over two years with options to purchase up to 463,328 shares vesting on August 3, 2022, and options to purchase up to 463,312 shares vesting on August 3, 2023, subject to continued service by the optionee, and expire 10 years from the date of grant with an exercise price of $3.40 per share. The actual number of options that are eligible for the time-based vesting is contingent upon the timely achievement of certain pre-determined corporate goals by the Company and/or its subsidiaries as set forth in the grant documents. The Company has calculated the estimated fair market value of these options at $1,811,216, using the Black-Scholes model and the following assumptions: term 5.5 years, stock price $3.31, exercise price $3.40, 69.13% volatility, 1.19% risk free rate, and no forfeiture rate.

Effective September 7, 2021, the Company granted stock options to purchase 50,000 shares of common stock to two employees in exchange for services provided to the Company and/or its subsidiaries. These options vest over two years with 25,000 shares vesting on September 7, 2022, and 25,000 shares vesting on September 7, 2023 subject to continued service by the optionee and expire 10 years from the date of grant with an exercise price of $3.40 per share. The Company has calculated the estimated fair market value of these options at $98,322, using the Black-Scholes model and the following assumptions: term 5.5 years, stock price $3.32, exercise price $3.40, 68.98% volatility, 1.38% risk free rate, and no forfeiture rate.

On September 21, 2021, the Company amended the terms of certain outstanding options such that (i) the expiration date for outstanding options to purchase up to an aggregate of 335,000 shares of the Company’s common stock, granted on April 13, 2020 under the 2015 Stock Incentive Plan, were extended from six (6) to ten (10) years from the date of the grant. (ii) the expiration date for outstanding options to purchase up to an aggregate of 89,163 shares of the Company’s common stock, granted on January 23, 2018 and amended on December 16, 2019 under the 2015 Stock Incentive Plan, were extended from six (6) to ten (10) years from the date of the grant and (iii) the expiration date for outstanding options to purchase up to an aggregate of 308,066 shares of the Company’s common stock, granted on February 13, 2017 and March 30, 2017 (and amended on December 16, 2019) under the 2015 Stock Incentive Plan, were extended from six (6) to ten (10) years from the date of the grant. As a result of these amendments $315,858 was recorded as additional options expense.

Below is a table summarizing the options issued and outstanding as of September 30, 2021, all of which were issued pursuant to the 2011 Equity Incentive Plan (for option issuances prior to 2016) or the 2015 Stock Incentive Plan (for option issuances commencing in 2016) and which have an aggregate weighted average remaining contractual life of 4.58 years. As of September 30, 2021, an aggregate of 6,000,000 shares of common stock were authorized for issuance under the 2015 Stock Incentive Plan, of which 554,021 shares of common stock remained available for future issuance thereunder.

Stock-based compensation expense related to stock options of $664,819 and $861,312 was recorded in the nine months ended September 30, 2021 and September 30, 2020, respectively. Total remaining unrecognized compensation cost related to non-vested stock options is $1,738,661 and is expected to be recognized over a period of 1.94 years. As of September 30, 2021, the total intrinsic value of stock options outstanding was nil.

c) Restricted Stock Units (RSUs)

Below is a table summarizing the RSUs issued and outstanding as of September 30, 2021, all of which were issued pursuant to the 2015 Stock Incentive Plan.

Effective January 1, 2021, the Company granted RSUs of 5,000 shares of common stock to a Company employee in exchange for services provided to the Company. These RSUs vested immediately, on January 1, 2021 and resulted in the issuance of 3,000 shares (the remaining 2,000 shares were withheld for taxes and returned as authorized shares under the 2015 Stock Incentive Plan) and total compensation expense of $19,450.

Effective March 25, 2021, the Company granted aggregate RSUs of 30,000 shares of common stock to two non-executive directors in exchange for services provided to the Company. These RSUs vest over two years, with 50% vesting on each of March 25, 2022 and March 25, 2023, subject to continued service, and will result in total compensation expense of $107,700.

On March 25, 2021, 15,000 RSUs previously granted to a non-executive director were cancelled and returned as authorized shares under the 2015 Stock Incentive Plan upon the resignation of such director prior to vesting.

On April 13, 2021, 26,250 RSUs vested and resulted in the issuance of 21,712 shares (the remaining 4,538 shares were withheld for taxes and returned as authorized shares under the 2015 Stock Incentive Plan).

Effective May 1, 2021, the Company granted RSUs of 150,000 shares of common stock to an employee in exchange for services provided to the Company. These RSUs vest over three years with 50,000 units vesting on each of May 1, 2022, May 1, 2023 and May 1, 2024, respectively, subject to continued service, and will result in total compensation expense of $496,500.

Effective August 3, 2021, the Company approved the granting of RSU’s under the 2015 Stock Incentive Plan vesting upon achievement of certain corporate goals (see additional details in Note 8 (h)). Pursuant to this approval, the Company granted RSUs of 460,191 shares of common stock to various personnel (including directors, executives, members of management and employees of the Company and/or its subsidiaries) in exchange for services provided to the Company and/or its subsidiaries). The actual number of RSUs that are eligible for the time-based vesting is contingent based upon the timely achievement of certain pre-determined corporate goals by the Company and/or its subsidiaries as set forth in the grant documents. The RSUs eligible for vesting shall vest in two equal installments at 12 months and 24 months from the grant date, subject to continued service. These RSUs vest over two years with up to 230,102 units vesting on August 3, 2022, and up to 230,089 units vesting on August 3, 2023 and will result in total compensation expense of $1,523,232.

Effective September 7, 2021, the Company granted RSUs of 38,000 shares of common stock to various employees of the Company and/or its subsidiaries in exchange for services provided to the Company and/or its subsidiaries. These RSUs vest over two years with 19,000 units vesting on September 7, 2022, and 19,000 units vesting on September 7, 2023, subject to continued service and will result in total compensation expense of $126,160.

Below is a table summarizing the RSUs issued and outstanding as of September 30, 2021 and which have an aggregate weighted average remaining contractual life of 1.35 years.

Stock-based compensation expense related to RSUs of $435,678 and $64,553 was recorded in the nine months ended September 30, 2021 and September 30, 2020, respectively. Total remaining unrecognized compensation cost related to non-vested RSUs is $1,972,118. As of September 30, 2021, the total intrinsic value of the RSUs outstanding was nil.