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Share-Based Compensation & Warrants

3 Months Ended

Mar. 31, 2023

Equity [Abstract]

Share-Based Compensation & Warrants

Note 13. Share-Based Compensation & Warrants

Options

Generally accepted accounting principles require share-based payments to employees, including grants of employee stock options, warrants, and common stock to be recognized in the income statement based on their fair values at the date of grant, net of estimated forfeitures.

The Company has granted stock-based compensation to employees, including the issuance of 1,872,918 employee stock options granted in June 2022 that were to vest over a period of two years, for which 451,158 of these options were cancelled with the resignation without cause in October 2022 of our prior Chief Executive Officer. For the three months ended March 31, 2023 and 2022, employee stock-based compensation was none and $111,528. On October 24, 2022, the previous Compensation Committee resolved to increase their compensation including the issuance of 100,000 stock options per independent board member, exercisable at $2.50 per share, vesting immediately. Non-statutory or independent Board of Director stock-based compensation was none and $427,500 for the three months ended March 31, 2023 and 2022. In 2022, the Company closed on its underwritten public offering in which the Company granted the underwriter, EF Hutton, division of Benchmark Investments, LLC (“EF Hutton”), a 45-day option to purchase up to an additional 240,000 shares of Common Stock at the public offering price per share, less the underwriting discounts and commissions, to cover over-allotments, if any. These options were not exercised and expired.

There were no other options granted during the three months ended March 31, 2023 and 2022, respectively.

The assumptions used in the Black-Scholes option pricing model to determine the fair value of the options on the date of issuance are as follows:

Schedule of warrant assumptions
		December 31, 2021 through December 31, 2022
Risk-free interest rate		0.24 – 4.57%
Expected dividend yield		None
Expected life of warrants		3.33-10 years
Expected volatility rate		156 - 273%

The following table summarizes all stock option activity of the Company for the three months ended March 31, 2023 and 2022:

Schedule of option activity
		Number of Shares				Weighted Average Exercise Price				Weighted Average Remaining Contractual Life (Years)
Outstanding, December 31, 2022			1,833,566			$	2.59				6.47
Granted			-				-				-
Exercised			-				-				-
Forfeited			(16,667	)			12.00				-
Outstanding, March 31, 2023			1,816,899			$	2.50				6.26

Outstanding, December 31, 2021			650,000			$	12.00				8.53
Granted			240,000				5.00				0.12
Exercised			-				-				-
Forfeited			(240,000	)			5.00				0.12
Outstanding, March 31, 2022			650,000			$	12.00				7.28

Exercisable, December 31, 2022			1,526,869			$	2.65				5.94

Exercisable, March 31, 2023			1,526,869			$	2.65				5.69

Exercisable, December 31, 2021			180,000			$	12.00				7.01

Exercisable, March 31, 2022			215,833			$	12.00				6.68

As of March 31, 2023 and 2022, the aggregate intrinsic value of the Company’s outstanding options was approximately none. The aggregate intrinsic value will change based on the fair market value of the Company’s common stock.

Warrants

As of March 31, 2023 and 2022, the Company had 80,000 warrants outstanding. On February 14, 2022, the Company closed on its underwritten public offering of 1,600,000 shares of common stock, at a public offering price of $5.00 per share. In addition, the Company has issued the underwriter, EF Hutton, a 5-year warrant to purchase 80,000 shares of common stock at an exercise price equal $5.75 and were valued with a fair market value of $374,000. The impact of these warrants has no effect on stockholder’s equity, as they are considered equity-like instruments, and are considered a direct expense of the offering.