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NOTE 6 — Stock-Based Compensation Plan (Policies)
 12 Months Ended
Dec. 31, 2024
Share-Based Payment Arrangement [Abstract]  
Stock-Based Compensation Program

Stock-Based Compensation Program

The Company has one share-based compensation plan in effect for the two years presented: the 2004 Equity Incentive Plan (the “2004 Plan”). The 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. 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. Vesting and exercise provisions are determined by the Board of Directors, with a maximum term of ten years. The 2004 Plan is set to terminate on April 23, 2034.

 

 

SOCKET MOBILE, INC.
NOTES TO FINANCIAL STATEMENTS

 

 

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, 2025 and 2024, a total of 304,225 and 293,445 additional shares, respectively, became available for grant from the 2004 Plan.
Stock-Based Compensation Information

Stock-Based Compensation Information

The stock-based compensation expense included in the Company’s statements of income for the years ended December 31, 2024 and 2023, consisted of the following:

 

 

                
   Years Ended December 31,
Income Statement Classification  2024  2023
  Cost of revenues   $119,872   $137,116 
  Research and development   $318,258   $358,632 
  Sales and marketing   $283,672   $295,704 
  General and administrative   $332,494  $364,930
    Stock-based compensation expenses  $1,054,296  $1,156,382

 

 

As of December 31, 2024, the remaining unamortized stock-based compensation expense was $1,295,112 and is expected to be amortized over a weighted average period of 2.3 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.

 

On June 25, 2024, the Company completed a one-time tender offer to exchange 613,936 stock options granted under its 2004 Equity Incentive Plan for current employees, executive officers, and directors. All surrendered options were cancelled as of the Exchange Offer’s expiration on June 25, 2024. The Company granted new options to purchase an aggregate of 613,936 shares of common stock pursuant to the terms of the Exchange Offer and 2004 Equity Incentive Plan. These new options were priced at the closing market price of $1.1197 on June 25, 2024, with monthly vesting over 4 years and a 10-year expiration date of June 25, 2034. The Company’s stockholders approved the stock option exchange program at the 2024 annual meeting on May 15, 2024. The Company accounted for the exchange as a modification of the options and calculated the incremental expense to be $187,117, which will amortized over the estimated life of the new options. Additionally, on June 26, 2024, the Company granted 75,000 stock options at a closing market price of $1.08. No stock options were granted during the corresponding period in 2023.

 

 

SOCKET MOBILE, INC.
NOTES TO FINANCIAL STATEMENTS

 

The weighted-average estimated fair value of stock options granted in 2024 was $0.7791, determined using a binomial lattice valuation model with the following weighted-average assumptions:

 

                
   Years Ended December 31,
   2024  2023
Risk-free interest rate (%)   4.24%   —   
Dividend yield   —      —   
Volatility factor   106.88%   —   
Expected option life (years)   3.41    —   

 

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, 2024 and 2023:

 

                
   Years Ended December 31,
   2024  2023
Total intrinsic value of stock options exercised   $(23,688)  $(11,982)
Cash received from stock option exercises   $23,750   $212,815 

 

The following summarizes stock option activity under the 2004 Plan as of and for the years ended December 31, 2024 and 2023:

 

 

                               
  Outstanding Options
  Number
of Shares		  Weighted
Average
Exercise Price Per Share		  Remaining Contractual Term
(in years)		  Intrinsic
Value
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           
   Granted  688,936   $1.12           
   Exercised  (25,000)  $0.42           
   Canceled  (684,791)  $0.13           
Balance as of December 31, 2024  1,130,260   $1.93    7.33   $20,142 
Exercisable  509,875   $2.86    4.75   $20,142 
Unvested  620,385   $1.16    9.50   $0 

 

 

SOCKET MOBILE, INC.
NOTES TO FINANCIAL STATEMENTS

 

Stock options outstanding as of December 31, 2024 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 - $1.10   94,000    8.67   $1.08    94,000   $1.08 
$1.12 - $1.25   613,349    9.50   $1.12    613,349   $1.12 
$1.50 - $1.98   82,325    4.25   $1.90    82,325   $1.90 
$2.00 - $2.27   33,500    0.25   $2.21    33,500   $2.21 
$2.32 - $2.36   96,148    4.67   $2.32    96,148   $2.48 
$2.40 - $2.71   19,000    4.08   $2.48    19,000   $3.85 
$2.74 - $2.75   38,600    1.25   $2.75    38,600   $2.75 
$2.82 - $2.95   38,551    4.42   $2.93    38,551   $2.93 
$3.04 - $3.29   12,000    7.50   $3.05    12,000   $3.05 
$3.45 - $3.88   17,000    1.92   $3.81    17,000   $3.81 
$4.22 - $6.90   40,787    3.50   $4.45    40,787   $4.45 
$7.20 - $33.75   45,000    6.33   $8.58    45,000   $8.58 
$0.95 - $33.75   1,130,260    7.33   $2.86    1,130,260   $1.93 

 

  

Restricted stock – The Company issues restricted stocks to employees, consultants and directors, and holds shares of such stock in escrow until the shares vest, subject to the employees, consultants and directors 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, 2024 and 2023:

 

              
  Number of Restricted Stocks  Weighted
Average
Price Per Share
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 of December 31, 2023  991,199   $2.83 
   Granted  506,000   $1.11 
   Vested  (316,519)  $1.16 
   Forfeited  (101,840)  $2.18 
Unvested as December 31, 2024  1,078,840   $0.98