NOTE 3 — STOCK-BASED COMPENSATION

The Company maintains a stock option plan and omnibus equity incentive plan under which it grants stock options to certain executives, key employees and consultants. It also has granted stock options outside of the plans as inducement awards. The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model.  All options are charged against income at their fair value.  The entire compensation expense of the award is recognized over the vesting period.

The Company issues performance share units (PSUs) under its omnibus equity incentive plan. Performance share units are equity classified and measured at the fair market value of the underlying stock at the grant date.

Shares of stock granted for director fees under the non-employee director compensation plan and under its omnibus equity incentive plan are recorded at the fair value of the shares at the grant date.

The Company issues restricted stock awards under its omnibus equity incentive plan and outside the plan as incentive awards. Restricted stock awards are equity classified and measured at the fair market value of the underlying stock at the grant date. The fair value of restricted stock awards vesting at certain market capitalization thresholds were estimated on the date of grant using the Brownian Motion Monte Carlo lattice model. The fair value of other restricted stock awards were estimated on the date of grant at the current stock price. We recognize restricted stock expense using the straight-line attribution method over the requisite service period and account for forfeitures as they occur.

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 incentive stock options and nonqualified stock options. As of March 31, 2024, there were 2,120,000 shares reserved for outstanding awards and 604,250 shares available for issuance under the 2015 Plan. Additional options may be issued under the 2015 Plan as outstanding options are forfeited.

The 2021 Plan provides for the grant of incentive stock options, nonqualified stock options, stock awards, restricted stock awards, restricted stock units and/or stock appreciation rights to employees, consultants and directors. As of March 31, 2024, there were 656,744 shares reserved for outstanding awards and 152,811 shares available for issuance under the 2021 Plan. Additional awards may be issued under the 2021 Plan as outstanding awards are forfeited.

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. Non-employee director compensation is paid pursuant to the Non-Employee Director Compensation Plan. All payments were and are pro-rated for partial service.

Time Based Stock Options

The following table summarizes the activities for our stock options with time based vesting for the three months ended March 31, 2024, and 2023.

The following table summarizes the status of the stock options:

Total stock-based compensation expense was $393,113 and $535,059 for the three months ended March 31, 2024, and 2023, respectively. No cash was received from option exercises for the three months ended March 31, 2024, and 2023, respectively.

The following table presents information pertaining to options outstanding at March 31, 2024:

As of March 31, 2024, there was $2,719,478 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the 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 March 31, 2024, and March 31, 2023, was $3,884,426 and $3,511,874, respectively.

Performance Based Stock Options

 The following table summarizes the activities for our unvested performance based stock option awards for the three months ended March 31, 2024, and 2023.

Total stock-based compensation expense was $8,121 and zero for the three months ended March 31, 2024, and 2023, respectively.

As of March 31, 2024, there was $168,223 of unrecognized compensation cost related to unvested employee performance based options. This amount is expected to be recognized over a weighted-average period of 36 months.

Restricted Stock Awards and PSUs

The following table summarizes the activities for our restricted stock awards and PSUs for the three months ended March 31, 2024, and 2023.

Total stock-based compensation expense was $122,551 and $170,387 for the three months ended March 31, 2024, and 2023, respectively.

As of March 31, 2024, and 2023, there was $755,513 and $1,447,790 of unrecognized compensation cost related to unvested employee restricted stock awards and PSUs. This amount is expected to be recognized over a weighted-average period of 21 months.

Common Stock Warrants

The following table summarizes the activities for our common stock warrants issued in connection with our loan financing agreement with HSBC for the three months ended March 31, 2024, and 2023.

As of March 31, 2024, and 2023, there was $52,125 and zero of unrecognized cost related to unvested warrants.