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STOCKHOLDERS EQUITY | 6 Months Ended
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Jun. 30, 2024
STOCKHOLDERS' EQUITY |
STOCKHOLDERS' EQUITY | NOTE 9 – STOCKHOLDERS’ EQUITY On January 25, 2023, the holders of 1,692,672 shares of Series D Preferred stock converted the preferred shares and the Company issued 1,692,672 shares of common stock. The Company also paid the holders $787,730 for cumulative dividends payable as declared on November 28, 2022. 1,590,672 shares of the 1,692,672 shares of Series D Preferred stock that were converted and $740,261 of the $787,730 of dividends paid related to the estate of John Lawrence, who was a prior President and Chairman of the Company. On January 26, 2023, in conjunction with its share repurchase plan, the Company returned to treasury and cancelled 418,696 of its common shares which were repurchased prior to December 31, 2022 for $202,980. Share-based compensation The Company had no equity awards outstanding during fiscal year 2023. During the six months ended June 30, 2024, stock option and RSU awards were granted in accordance with our 2023 Equity Incentive Plan, which was approved by the Company’s shareholders. The Company recognized $94,922 and $nil during the three months ended June 30, 2024 and 2023, respectively, and $300,847 and $nil during the six months ended June 30, 2024 and 2023, respectively, of share-based compensation expense arising from stock option and RSU grants as follows:
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2024 |  |  | 2023 |  |  | 2024 |  |  | 2023 |
Share-based compensation expense: |  |  |  |  |  |  |  |  |  |  |  |
Stock options |  | $ | 47,558 |  |  | $ | - |  |  | $ | 63,469 |  |  | $ | - |
RSUs |  |  | 47,364 |  |  |  | - |  |  |  | 237,378 |  |  |  | - |
Total share-based compensation expense |  | $ | 94,922 |  |  | $ | - |  |  | $ | 300,847 |  |  | $ | - |
Stock options: Stock options granted have either a 3-year or 10-year contractual term and are subject to either service or performance-based vesting conditions. The following table shows the annual weighted-average assumptions used to value options granted during the six months ended June 30, 2024:
|  | Six Months Ended |
Grant-Date Weighted-Average Assumptions |  | June 30, 2024 |
Expected term (in years) |  |  | 3.9 |
Risk-free interest rate |  |  | 4.3 | %
Expected dividend yield |  |  | 0.0 | %
Expected volatility |  |  | 140.4 | %
Fair value per share of options granted |  | $ | 0.17 |
Expected term – The expected term represents the period of time that options are expected to be outstanding. As the Company does not have sufficient historical exercise behavior, it uses the contractual term of the option for the expected term assumption. Risk-free interest rate – The risk-free interest rate is based on the U.S. Treasury rate in effect at the time of the grant with an equivalent term approximating the expected term of the options. Expected dividend yield—The Company bases the expected dividend yield assumption on the fact that it has never paid cash dividends and has no present intention to pay cash dividends. Expected volatility – The expected volatility is based on the historical volatility of our stock price over the expected term of the stock option. Activity with respect to stock options is summarized as follows:
|  |  |  |  |  |  |  | Weighted-Average |  |  |  |
|  |  |  |  | Weighted- |  |  | Remaining |  |  | Aggregate |
|  |  |  |  | Average |  |  | Contractual |  |  | Intrinsic |
|  | Shares |  |  | Exercise Price |  |  | Term (in years) |  |  | Value |
Options outstanding, December 31, 2023 |  |  | - |  |  |  | n/a |  |  |  | n/a |  |  |  | n/a |
Granted |  |  | 3,900,000 |  |  | $ | 0.22 |  |  |  | n/a |  |  |  | n/a |
Exercised |  |  | - |  |  |  | n/a |  |  |  | n/a |  |  |  | n/a |
Forfeited |  |  | - |  |  |  | n/a |  |  |  | n/a |  |  |  | n/a |
Expired |  |  | - |  |  |  | n/a |  |  |  | n/a |  |  |  | n/a |
Options outstanding, June 30, 2024 |  |  | 3,900,000 |  |  | $ | 0.22 |  |  |  | 3.6 |  |  | $ | 450,000 |
Nonvested options, June 30, 2024 |  |  | 3,900,000 |  |  | $ | 0.22 |  |  |  | 3.6 |  |  | $ | 450,000 |
Vested and exercisable options, June 30, 2024 |  |  | - |  |  |  | n/a |  |  |  | n/a |  |  |  | n/a |
At June 30, 2024, total unrecognized share-based compensation expense related to stock options was $606,531, which is expected to be recognized over a weighted-average remaining period of 4.0 years. Restricted stock units: Activity with respect to RSUs is summarized as follows:
|  |  |  |  | Weighted-Average |
|  |  |  |  | Grant-Date |
|  | Shares |  |  | Fair Value |
Nonvested shares at December 31, 2023 |  |  | - |  |  |  | n/a |
Granted |  |  | 2,670,000 |  |  | $ | 0.22 |
Vested |  |  | (791,667 | ) |  | $ | 0.22 |
Forfeited |  |  | - |  |  |  | n/a |
Nonvested shares at June 30, 2024 |  |  | 1,878,333 |  |  | $ | 0.23 |
At June 30, 2024, total unrecognized share-based compensation expense related to RSUs was $363,172, which is expected to be recognized over a weighted-average remaining period of 1.9 years. Common stock warrants No warrants were issued, expired, or exercised during the six months ended June 30, 2024 and 2023. The composition of the Company’s warrants outstanding at June 30, 2024 and 2023 was as follows:
Number of warrants |  |  | Exercise Price |  |  | Expiration Date |  | Remaining life (years) |
| 2,285,715 |  |  | $ | 0.46 |  |  | 7/31/2025 |  |  | 1.08 |
| 804,000 |  |  | $ | 0.46 |  |  | 1/27/2026 |  |  | 1.58 |
| 7,650,000 |  |  | $ | 0.85 |  |  | 8/3/2026 |  |  | 2.09 |
| 1,606,500 |  |  | $ | 0.85 |  |  | 2/1/2026 |  |  | 1.59 |
| 12,346,215 |  |  |  |  |  |  |  |  |  |  |

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