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NOTE 6 — Stock-Based Compensation Plan

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement [Abstract]

NOTE 6 — Stock-Based Compensation Plan

NOTE 6 — Stock-Based Compensation Plan

Stock-Based Compensation Program

The Company has one share-based compensation plan in effect in the two years presented: the 2004 Equity Incentive Plan (the “2004 Plan”). The 2004 Plan allows for the grant of incentive stock options, non-statutory stock options, restricted stock, stock appreciation rights, and performance awards to employees, directors, and consultants of the Company. Stock options are granted at an exercise price per share equal to the fair market value per share of common stock on the date of grant. Restricted stocks are granted at zero cost. The vesting and exercise provisions are determined by the Board of Directors, with a maximum term of ten years. The termination date of 2004 Plan was approved to extend from April 23, 2024 to April 23, 2034 at our annual meeting of shareholders in June 2022.

The 2004 Plan allows for an annual increase in the number of shares authorized under the plan to be added on the first day of each fiscal year equal to the least amount of 400,000 shares, 4% of the outstanding shares on that date, or an amount as determined by the Board of Directors. On January 1, 2024 and 2023, a total of 293,445 and 283,587 additional shares, respectively, became available for grant from the 2004 Plan.

Stock-Based Compensation Information

The stock-based compensation expense included in the Company’s statements of income for the years ended December 31, 2023 and 2022, consisted of the following:


		Years Ended December 31,
Income Statement Classification		2023				2022
Cost of revenues		$	137,116			$	119,456
Research and development			358,632				313,904
Sales and marketing			295,704				251,862
General and administrative			364,930				313,470
Stock-based compensation expenses		$	1,156,382			$	998,692

SOCKET MOBILE, INC.
NOTES TO FINANCIAL STATEMENTS

As of December 31, 2023, the remaining unamortized stock-based compensation expense was $1,922,788 and is expected to be amortized over a weighted average period of 2.4 years.

Stock Options – Stock option awards have an exercise price equal to the closing price on the date of grant, expire ten years from the date of grant and vest over a four-year period at 25% per year. The Company calculates the value of each stock option grant, estimated on the date of grant, using binomial lattice option pricing model. No stock options were granted in 2023. The weighted-average estimated fair value of stock options granted during 2022 was $1.74, using the following weighted-average assumptions:


		Years Ended December 31,
		2023				2022
Risk-free interest rate (%)			—				3.22	%
Dividend yield			—				—
Volatility factor			—				105.44	%
Expected option life (years)			—				2.0

The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant; the dividend yield is calculated as the ratio of dividends paid per share of common stock to the stock price on the date of grant; the expected life is based on historical and expected exercise behavior; and volatility is based on the historical volatility of the Company’s stock price over the expected life of the option.

The table below presents the information related to stock option activity for the years ended December 31, 2023 and 2022:


		Years Ended December 31,
		2023				2022
Total intrinsic value of stock options exercised		$	(11,982	)		$	164,176
Cash received from stock option exercises		$	212,815			$	151,749

SOCKET MOBILE, INC.
NOTES TO FINANCIAL STATEMENTS

The following summarizes stock option activity under the 2004 Plan as of and for the years ended December 31, 2023 and 2022:


			Outstanding Options
			Number of Shares				Weighted Average Exercise Price Per Share				Remaining Contractual Term (in years)				Intrinsic Value
	Balance as of December 31, 2021		1,378,122			$	2.81
	Granted		49,000			$	3.03
	Exercised		(106,190	)		$	1.43
	Canceled		(24,210	)		$	3.12
	Balance as of December 31, 2022		1,296,722			$	2.93
	Granted		—			$	—
	Exercised		(138,909	)		$	1.53
	Canceled		(6,698	)		$	1.46
	Balance as of December 31, 2023		1,151,115			$	3.11				4.75			$	8,210
	Exercisable		1,068,449			$	2.88				4.50			$	8,210
	Unvested		82,666			$	6.08				7.58			$	0

Stock options outstanding as of December 31, 2023 are summarized below:


			Options Outstanding												Options Exercisable
Range of Exercise Prices			Number of Options Outstanding				Weighted Average Remaining Life (Years)				Weighted Average Exercise Price				Number of Options Exercisable				Weighted Average Exercise Price
$0.95 - $1.25			86,000				2.92			$	1.09				86,000			$	1.09
$1.59 - $1.90			147,825				3.33			$	1.87				147,825			$	1.87
$2.00 - $2.32			329,196				4.92			$	2.30				329,196			$	2.30
$2.40 - $2.75			138,775				3.42			$	2.63				138,775			$	2.63
$2.93 - $2.95			106,991				4.75			$	2.93				104,658			$	2.93
$3.05 - $4.22			160,253				4.50			$	3.82				153,253			$	3.85
$4.49 - $8.58			182,075				7.42			$	6.39				108,742			$	6.34
$0.95 - $8.58			1,151,115				4.75			$	3.11				1,068,449			$	2.88

Restricted stock – The Company issues restricted stocks to employees and consultants and holds shares of such stock in escrow until the shares vest on the schedule of 15% after year one, 20% after year two, 25% after year three and 40% after year four, subject to the employees and consultants being a continuing service provider on the vesting dates. If the service or employment is terminated, unvested shares revert to the Company. Shares are registered at grant, so share owners may vote at the annual stockholder meeting. Shares of restricted stocks are granted at zero cost basis. Compensation cost of the shares of restricted stocks issued by the Company is recognized on a straight-line basis over the 4-year vesting period.

The following summarizes information related to restricted stock activity under the 2004 Plan for the years ended December 31, 2023 and 2022:


			Number of Restricted Stocks				Weighted Average Price Per Share
	Unvested as of December 31, 2021			646,125			$	2.18
	Granted			330,700			$	3.82
	Vested			(111,719	)		$	2.11
	Forfeited			(20,130	)		$	2.29
	Unvested as of December 31, 2022			844,976			$	2.84
	Granted			463,720			$	2.30
	Vested			(286,062	)		$	2.02
	Forfeited			(31,435	)		$	2.66
	Unvested as December 31, 2023			991,199			$	2.83