NOTE 4 — STOCK-BASED COMPENSATION

The Company has three equity incentive plans: the 2015 Stock Option Plan, as amended (the “2015 Plan”), the 2021 Omnibus Equity Incentive Plan (the “2021 Plan”), and the Non-Employee Director Compensation Plan. The Company has also issued restricted stock and stock options as employment inducement awards to its Chief Executive Officer and Chief Commercial Officer, respectively.

The 2015 plan provides for the grant of up to 6,000,000 incentive stock options and nonqualified stock options. As of December 31, 2023, there were options to purchase 2,436,250 shares of the Company’s common stock outstanding to certain executives, key employees and consultants under the 2015 Plan, of which 85,000 were issued during the year ended December 31, 2023 and 445,000 were issued during the year ended December 31, 2022. Additional options may be issued under the 2015 Plan as outstanding options are forfeited. As of December 31, 2023, there were 2,724,250 shares reserved for outstanding awards and available for issuance under the 2015 Plan.

The 2021 Plan provides for the grant of up to 1,000,000 incentive stock options, nonqualified stock options, stock awards, restricted stock awards, restricted stock units and/or stock appreciation rights to employees, consultants and directors. During the years ended December 31, 2023 and 2022, there were awards with respect to 21,100 and 97,100 shares of common stock, respectively, issued under the 2021 Plan. Additional awards may be issued under the 2021 Plan as outstanding awards are forfeited. As of December 31, 2023, there were 822,142 shares reserved for outstanding awards and available for issuance under the 2021 Plan.

Each non-employee director of the Company (other than the Chairman of the Board) is eligible to receive $110,000 annually, to be paid quarterly $12,500 in cash and $15,000 in common stock.  The Chairman of the Board is eligible to receive $140,000 annually, to be paid quarterly $12,500 in cash and $22,500 in common stock. From May 18, 2021 to May 6, 2022, non-employee director compensation was paid pursuant to the 2021 Plan. Since May 6, 2022, non-employee director compensation has been paid pursuant to the Non-Employee Director Compensation Plan. All payments were and are pro-rated for partial service.

The per share weighted average fair value of stock options granted during the year ended December 31, 2023 and December 31, 2022 was $1.84 and $1.98, respectively.  The fair value of each award is estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in the year ended December 31, 2023 and December 31, 2022. Historical information was the primary basis for the selection of the expected volatility, expected dividend yield and the expected lives of the options.  The risk-free interest rate was selected based upon yields of the U.S. Treasury issues with a term equal to the expected life of the option being valued. We have recognized tax benefits associated with stock-based compensation of $256,315 and $231,341 for the year ended December 31, 2023 and 2022, respectively.

Time Based Stock Options

The following table summarizes the activities for our stock options with time based vesting for the years ended December 31, 2023, and 2022.

 Schedule of time based stock options

The following table summarizes the status of the time-based stock options:

 Schedule of status of time based stock options

Total stock-based compensation expense was $1,940,720 and $2,083,397 for the years ended December 31, 2023, and 2022, respectively. Net cash received from option exercises for the years ended December 31, 2023, and 2022 was zero and $406,623, respectively.

The weighted-average grant-date fair value of options granted during the years ended December 31, 2023, and 2022 was $0.8 million and $1.8 million, respectively.  There were no options exercised during the year ended December 31,2023 and 1,031,250 options exercised during the year ended December 31, 2022.

The following table presents information pertaining to time- based stock options outstanding at December 31, 2023:

 Schedule of information pertaining to options outstanding

As of December 31, 2023, there was $3,145,616 of total unrecognized compensation cost related to non-vested time- based stock options granted under the Company’s plans.  That cost is expected to be recognized over a weighted-average period of 46 months.  The total fair value of shares vested as of December 31, 2023, and December 31, 2022, was $4,819,658 and $2,703,002, respectively.

Performance Based Stock Options

Pursuant to an employment agreement entered into on November 6, 2023, with the Company’s Chief Commercial Officer, and as an inducement to his employment, the Company issued a non-qualified option to purchase 200,000 shares of common stock that vest upon achievement of sales growth milestones. The following table summarizes the activities for our unvested performance stock option awards for the twelve months ended December 31, 2023, and 2022.

As of December 31, 2023, there was $176,345 of unrecognized compensation cost related to unvested employee performance options. This amount is expected to be recognized over a weighted-average period of 36 months. We have recognized tax benefits associated with restricted stock award compensation of $1,137 and zero for the twelve months ended December 31, 2023 and 2022, respectively.

RESTRICTED STOCK AWARDS

The following table summarizes the activities for our unvested restricted stock awards for the twelve months ended December 31, 2023, and 2022.

As of December 31, 2023, there was $1,076,664 of unrecognized compensation cost related to unvested employee restricted shares. This amount is expected to be recognized over a weighted-average period of 21 months. We have recognized tax benefits associated with restricted stock award compensation of $79,326 and $101,419 for the twelve months ended December 31, 2023 and 2022, respectively.