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Stock-Based Compensation

12 Months Ended

Dec. 31, 2023

Stock-Based Compensation

Stock-Based Compensation

Note 14 — Stock-Based Compensation

The Company has the following Stock Option Plans (“Plans”) that allow for the grants of both incentive stock options or ISOs, which can result in potentially favorable tax treatment to the participant, and non-statutory stock options. The Company’s 2023 Equity Incentive Plan (the “2023 Plan”) was approved by the stockholders of the Company on June 15, 2023. The Company no longer issues any options under its prior 2014 Plan. The 2023 Plan no longer contains an “evergreen provision”. As of December 31, 2023, the authorized shares of common stock under the 2023 Plan, as amended, were 12,641,637.

The exercise price per share subject to an option is determined by the administrator, but in the case of an ISO must not be less than the fair market value of a share of our common stock on the date of grant and in the case of a non-statutory stock option must not be less than 100% of the fair market value of a share of our common stock on the date of grant.

Under the 2023 Plan, the Company may grant stock options, stock appreciation rights, performance awards of stock and/or cash, and stock awards of restricted stock.

Options issued or outstanding under the Stock Options Plans are as follows:


		2014		2023
		Plan		Plan		Total
Outstanding or Exercised as of December 31, 2021		11,184,450		—		11,184,450
Available for future issuance under plan		1,550,004		—		1,550,004
Total authorized by plan		12,734,454		—		12,734,454

Outstanding or Exercised as of December 31, 2022		11,168,061		—		11,168,061
Available for future issuance under plan		1,495,760		—		1,495,760
Totals authorized by plan		12,663,821		—		12,663,821

Outstanding or Exercised as of December 31, 2023		—		8,791,833		8,791,833
Available for future issuance under plan		—		3,849,804		3,849,804
Totals authorized by plan		—		12,641,637		12,641,637

The 2023 Plan gives the Board of Directors of the Company the ability to determine vesting periods for all stock incentives granted under the 2023 Plan and allows option terms to be up to ten years from the original grant date. Employees’ incentive stock options typically vest at a minimum rate of 25% per year over a four-year period, commencing on the date of grant.

The following table summarizes stock option activity related to the Company’s standard employee incentive plan, excluding options awarded under the Long-term Incentive Plan (LTIP), for the years ended December 31, 2023, 2022 and 2021:


				Weighted			Average
		Number of		Average			Remaining Life
		Options		Exercise Price			(years)
Outstanding at December 31, 2020		2,633,175		$	3.09		6.53
Granted		1,100,500			17.23
Exercised		(739,956)			3.36
Expired or Forfeited		(170,085)			8.58
Outstanding at December 31, 2021		2,823,634		$	7.67		7.95
Granted		442,000			5.45
Exercised		(145,185)			2.56
Expired or Forfeited		(314,776)			9.27
Outstanding at December 31, 2022		2,805,673		$	7.80		7.28
Granted		180,000			4.43
Exercised		(28,240)			1.33
Expired or Forfeited		(46,125)			11.33

Outstanding at December 31, 2023		2,911,308		$	7.60		6.30

As of December 31, 2023, there were 2,093,850 options that were fully-vested and exercisable at a weighted average exercise price of $7.18 per share. The weighted average remaining contractual term on the vested options is 5.6 years. The unvested balance of 817,458 options as of December 31, 2023 were exercisable at a weighted average exercise price of $8.65 per share. The weighted average remaining contractual term on the vested options was 8.11 years.

As of December 31, 2022, there were 1,493,707 options that were fully-vested and exercisable at a weighted average exercise price of $6.88 per share. The weighted average remaining contractual term on the vested options is 6.3 years. The unvested balance of 1,311,966 options as of December 31, 2022, are exercisable at a weighted average exercise price of $8.83 per share. The weighted average remaining contractual term on the unvested options is 8.4 years.

As of December 31, 2021, there were 1,069,639 options that were fully-vested and exercisable at a weighted average exercise price of $5.70 per share. The weighted average remaining contractual term on the vested options is 6.6 years. The unvested balance of 1,753,995 options as of December 31, 2021, are exercisable at a weighted average exercise price of $9.62 per share. The weighted average remaining contractual term on the unvested options is 8.8 years.

The aggregate intrinsic value of the options exercised during the year ended December 31, 2023, 2022 and 2021 was approximately $85,263, $627,876 and $13,325,035, respectively.

The aggregate intrinsic value of the options outstanding as of December 31, 2023, 2022 and 2021 was approximately $563,874, $2,093,164 and $9,314,887, respectively.

The Black-Scholes-Merton option pricing model was used to estimate the fair value of share-based awards under FASB ASC Topic 718. The Black-Scholes-Merton option pricing model incorporates various and highly subjective assumptions, including expected term and share price volatility.

The expected term of options granted was estimated to be the average of the vesting term, historical exercise and forfeiture rates, and the contractual life of the option. The share price volatility at the grant date is estimated using historical stock prices based upon the expected term of the options granted. The risk-free interest rate assumption is determined using the rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued. We have never paid cash dividends on our common stock and do not anticipate paying cash dividends on our common stock in the foreseeable future. Therefore, the assumed expected dividend yield is zero.

The following summary table shows the assumptions used to compute the fair value of stock options granted, excluding LTIP, during 2023, 2022 and 2021 and their estimated value:


December 31,		2023			2022			2021
Assumptions for Black-Scholes:
Expected term in years			6.0 to 6.1			6.1			6.1 to 6.5
Volatility			86.97% to 88.42	%		85.44% to 87.09	%		82.8% to 86.0	%
Risk-free interest rate			3.58% to 4.43	%		2.18% to 3.95	%		0.96% to 1.25	%
Expected annual dividends			None			None			None
Value of options granted:
Number of options granted			180,000			442,000			1,100,500
Weighted average fair value per share		$	3.34		$	4.04		$	12.40
Fair value of options granted		$	600,345		$	1,783,710		$	13,642,976

Under FASB ASC Topic 718, “Compensation – Stock Compensation”, the Company has elected to account for forfeitures as they occur.

Unrecognized stock-based compensation expense was $5,036,891 as of December 31, 2023, relating to a total of 817,458 unvested stock options under the Company’s stock option plans. This stock-based compensation expense is expected to be recognized over a weighted average period of approximately 1.8 years.

During the year ended December 31, 2023, the Company issued 96,525 shares of common stock to the independent members of its Board of Directors as part of their annual retainer for services covering the period of July 2023 to June 2024. The fair market value on the date of award of the stock issued was $5.18, resulting in an aggregate fair value of approximately $500,000. The fair market value of these awards is expensed over twelve (12) months, beginning on July 1, 2023.

During the year ended December 31, 2022, the Company issued 200,000 shares of common stock to its Chief Operating Officer. The fair market value on the date of award of the stock issued was $5.64, resulting in an aggregate fair value of approximately $1,128,000. The fair market value of this award is expensed over a forty-two (42) month vesting period, which began June 15, 2022.

For the years ended December 31, 2023, 2022 and 2021, the Company recorded total stock-based compensation expense, including stock awards but excluding awards under the Company’s LTIP of $4,566,253, $4,645,026, and $4,047,444, respectively.