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Share-Based Compensation & Warrants
 9 Months Ended
Sep. 30, 2023
Equity [Abstract]  
Share-Based Compensation & Warrants

Note 9. 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 nine months ended September 30, 2023 and 2022, employee stock-based compensation was $1,260,476 and $1,340,703. On October 24, 2022, the 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 $855,000 for the nine months ended September 30, 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. On June 20, 2023, we issued a 15% secured promissory note due to Al Dali International for Gen. Trading & Cont. Co., a company organized under the laws of Kuwait (“DIC”). As security to secure repayment of the Note, we issued DIC an option to purchase 1,000,000 shares of our common stock at an exercise price of $1.179 per share, which was recorded as a debt discount in the amount of $467,509, which is amortized to interest expense over the term of the agreement using the effective interest method.

 

There were no other options granted during the nine months ended September 30, 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:

 

     
    December 31, 2021
through
September 30,
2023		  
Risk-free interest rate   0.24 - 5.23%  
Expected dividend yield   None  
Expected life   2.1 - 10 years  
Expected volatility rate   142 - 273%  

 

The following table summarizes all stock option activity of the Company for the nine months ended September 30, 2023 and 2022:

 

                       
    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     1,000,000       1.18       1.75  
Exercised     -       -       -  
Forfeited     (16,667 )     12.00       -  
Outstanding, September 30, 2023     2,816,899     $ 2.03       4.33  
                         
Outstanding, December 31, 2021     650,000     $ 12.00       7.53  
Granted     2,112,919       2.24       6.60  
Exercised     (16,667 )     11.1       -  
Forfeited     (740,000 )     10.00       -  
Outstanding, September 30, 2022     2,006,252     $ 2.56       6.93  
                         
Exercisable, December 31, 2022     1,526,869     $ 2.65       5.94  
Exercisable, September 30, 2023     2,671,883     $ 2.05       4.10  
                         
Exercisable, December 31, 2021     180,000     $ 12.00       7.01  
Exercisable, September 30, 2022     1,175,059     $ 2.67       7.09  

 

As of September 30, 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 September 30, 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.