NOTE 8 — Stock-Based Compensation	9 Months Ended
Sep. 30, 2024
Share-Based Payment Arrangement [Abstract]
NOTE 8 — Stock-Based Compensation	NOTE 8 — Stock-Based Compensation The Company recognizes the compensation cost in the financial statements for all stock-based awards to employees, including grants of stock options and restricted stock, based on the fair value of the awards as of the date that the awards are issued. Compensation cost for stock-based awards is recognized on a straight-line basis over the vesting period. The fair values of stock options are generally determined using a binomial lattice valuation model which incorporates assumptions about expected volatility, risk-free interest rate, dividend yield, and expected life. On June 25, 2024, the Company completed a one-time tender offer to exchange 613,936 shares granted under its 2004 Equity Incentive Plan to the current employees, executive officers, and directors of the Company. All surrendered options were cancelled effective as of the expiration of the Exchange Offer on June 25, 2024. The Company granted new options to purchase an aggregate of 613,936 shares of the Company’s common stock pursuant to the terms of the Exchange Offer and the Company’s 2004 Equity Incentive Plan. The new options were priced at the closing market price of $1.1197 on June 25, 2024, with a monthly vesting over 4 years and a new 10-year expiration date of June 25, 2034. The Company’s stockholders approved the implementation of this stock option exchange program at its 2024 annual meeting of stockholders on May 15, 2024. The fair value of granted options is $0.7821, determined through a binomial lattice valuation model. SOCKET MOBILE, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) September 30, 2024 In addition to the new shares issued under the exchange program, 75,000 stock options were granted during the nine months ended September 30, 2024. No stock options were granted during the corresponding period in 2023. The shares of restricted stock are issued to employees and consultants and are held in escrow by the Company 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 each of the vesting dates. If the service or employment is terminated, unvested shares are reverted to the Company. Shares are registered at grant, so share owners may vote at the annual stockholder meeting. Shares of restricted stock are granted on a zero-cost basis. Compensation cost of the restricted stock is recognized on a straight-line basis over the 4-year vesting period. For the nine months ended September 30, 2024 and 2023, the Company awarded 466,750 and 459,720 shares of restricted stock, respectively. Stocks are also issued to board directors with immediate vesting. Shares are granted at no cost and registered upon grant. The compensation cost of the stock is recognized immediately on the grant date. For the nine months ended September 30, 2024, and 2023, the Company awarded 39,250 and 44,000 shares of stock, respectively. As of September 30, 2024, there were 1,122,905 shares of restricted stock outstanding. Due to the existence of restrictions on sale or transfer until the shares vest, the Company does not count the shares of restricted stock as issued and outstanding shares until they vest. During the first nine months of 2024, 315,119 shares of stocks were issued to employees, consultants, and board directors through vesting. The market value of the vested shares is subject to tax withholding. Total stock-based compensation expenses for the three and nine months ended September 30, 2024, were $250,758 and $798,192, respectively, compared to expenses of $278,259 and $880,508 in the corresponding periods a year ago.

NOTE 8 — Stock-Based Compensation

9 Months Ended

Sep. 30, 2024

Share-Based Payment Arrangement [Abstract]

NOTE 8 — Stock-Based Compensation

The Company recognizes the compensation cost in the financial statements for all stock-based awards to employees, including grants of stock options and restricted stock, based on the fair value of the awards as of the date that the awards are issued. Compensation cost for stock-based awards is recognized on a straight-line basis over the vesting period.

The fair values of stock options are generally determined using a binomial lattice valuation model which incorporates assumptions about expected volatility, risk-free interest rate, dividend yield, and expected life.

On June 25, 2024, the Company completed a one-time tender offer to exchange 613,936 shares granted under its 2004 Equity Incentive Plan to the current employees, executive officers, and directors of the Company. All surrendered options were cancelled effective as of the expiration of the Exchange Offer on June 25, 2024. The Company granted new options to purchase an aggregate of 613,936 shares of the Company’s common stock pursuant to the terms of the Exchange Offer and the Company’s 2004 Equity Incentive Plan. The new options were priced at the closing market price of $1.1197 on June 25, 2024, with a monthly vesting over 4 years and a new 10-year expiration date of June 25, 2034. The Company’s stockholders approved the implementation of this stock option exchange program at its 2024 annual meeting of stockholders on May 15, 2024. The fair value of granted options is $0.7821, determined through a binomial lattice valuation model.

SOCKET MOBILE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

September 30, 2024

In addition to the new shares issued under the exchange program, 75,000 stock options were granted during the nine months ended September 30, 2024. No stock options were granted during the corresponding period in 2023.

The shares of restricted stock are issued to employees and consultants and are held in escrow by the Company 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 each of the vesting dates. If the service or employment is terminated, unvested shares are reverted to the Company. Shares are registered at grant, so share owners may vote at the annual stockholder meeting. Shares of restricted stock are granted on a zero-cost basis. Compensation cost of the restricted stock is recognized on a straight-line basis over the 4-year vesting period. For the nine months ended September 30, 2024 and 2023, the Company awarded 466,750 and 459,720 shares of restricted stock, respectively.

Stocks are also issued to board directors with immediate vesting. Shares are granted at no cost and registered upon grant. The compensation cost of the stock is recognized immediately on the grant date. For the nine months ended September 30, 2024, and 2023, the Company awarded 39,250 and 44,000 shares of stock, respectively.

As of September 30, 2024, there were 1,122,905 shares of restricted stock outstanding. Due to the existence of restrictions on sale or transfer until the shares vest, the Company does not count the shares of restricted stock as issued and outstanding shares until they vest. During the first nine months of 2024, 315,119 shares of stocks were issued to employees, consultants, and board directors through vesting. The market value of the vested shares is subject to tax withholding.

Total stock-based compensation expenses for the three and nine months ended September 30, 2024, were $250,758 and $798,192, respectively, compared to expenses of $278,259 and $880,508 in the corresponding periods a year ago.