NOTE 9 – STOCK-BASED COMPENSATION 

The Company’s stockholders have approved the Company’s 2018 Incentive Plan (as amended the “2018 Plan”) pursuant to which the Company may grant stock options, restricted stock and other equity-based awards with respect to up to an aggregate of 7,500 shares of the Company’s common stock with a vesting period of approximately four to five years. There were 2,374 shares available for future issuance under the 2018 Plan as of March 31, 2024.

The 2018 Plan is administered by the Compensation Committee of the Company’s Board of Directors, which has the authority to determine, among other things, the term during which an option may be exercised (not more than 10 years), the exercise price of an option and the vesting provisions.

The Company recognizes all employee share-based payments in the statement of operations as an operating expense, based on their fair values on the applicable grant date.

During the first fiscal quarter of 2022, the Company granted options to purchase 5,065 shares of common stock with market-based vesting conditions. The market-based stock options have an exercise price that range from $2.85 to $21.00. The market-based stock options will vest and become exercisable if the volume weighted average price of the Company’s common stock during a consecutive 60-day trading period (the “60 Day VWAP”) ranges between $10.50 and $21.00. The Company valued the market-based stock option awards using a Monte Carlo simulation model using a daily price forecast over ten years until expiration utilizing Geometric Brownian Motion that considers a variety of factors including, but not limited to, the Company’s common stock price, risk-free rate (1.7%), and expected stock price volatility (51.7%) over the expected life of awards (10 years). The weighted average fair value of market-based stock options granted during the period was $1.60.

During the year ended December 31, 2023, the Company granted options to purchase 865 shares of common stock with market-based vesting conditions. The market-based stock options will vest and become exercisable if the volume weighted average price of the Company’s common stock during a consecutive 60-day trading period (the “60 Day VWAP”) reaches $12.00. The Company valued the market-based stock option awards using a Monte Carlo simulation model using a daily price forecast over ten years until expiration utilizing Geometric Brownian Motion that considers a variety of factors including, but not limited to, the Company’s common stock price, risk-free rate (3.7%), and expected stock price volatility (50%) over the expected life of awards (5.1 years). The weighted average fair value of market-based stock options granted during the year was $1.56.

During the year ended December 31, 2023, the Company granted 1,247 shares of restricted stock to certain senior managers, including the Company’s executive officers, which vest in four equal installments over a four-year period, provided that the executive is employed by the Company on each scheduled vesting date. These grants included (i) a grant of 900 shares of restricted stock to Steve Towe, the Company’s Chief Executive Officer, which vests over four equal installments over a four-year period, provided that the Mr. Towe is employed by the Company on each scheduled vesting date, and (ii) grants of 82 shares of restricted stock to certain members of the board of directors, which vest in full on the first anniversary of the date of grant, provided that the director is a director of the Company on such date.

[A] Stock options:

A summary of the status of the Company’s stock options, relating to the Company’s market-based stock options that were granted to certain senior managers, including the Company’s executive officers, as of December 31, 2021, 2022 and 2023 and March 31, 2024, and changes during the periods then ended is presented below:

 SCHEDULE OF STOCK OPTIONS ACTIVITY

The following table summarizes information about stock options relating to the market-based stock options that were granted to certain senior managers, including the Company’s executive officers, at March 31, 2024.

 SUMMARY OF STOCK OPTION INFORMATION BY EXERCISE PRICE RANGE

A summary of the status of the Company’s stock options, excluding the market-based stock options that were granted to certain senior managers, including the Company’s executive officers, as of December 31, 2021, 2022 and 2023 and March 31, 2024 and changes during the periods then ended, is presented below:

 SCHEDULE OF STOCK OPTIONS ACTIVITY

 SUMMARY OF STOCK OPTION INFORMATION BY EXERCISE PRICE RANGE

 SCHEDULE OF OPTIONS OUTSTANDING AND EXERCISABLE

The fair value of each option grant on the date of grant is estimated using the Black-Scholes option-pricing model reflecting the following weighted-average assumptions:

 SCHEDULE OF FAIR VALUE STOCK OPTION ASSUMPTIONS

Expected volatility is based on historical volatility of the Company’s common stock and the expected life of options is based on historical data with respect to employee exercise periods.

For the three months ended March 31, 2023 and 2024 and the years ended December 31, 2021, 2022, and 2023, the Company recorded $618 (unaudited), $688, $1,684, $2,943, and $2,712, respectively, of stock-based compensation expense in connection with the stock option grants.

The fair value of options vested during the years ended December 31, 2021, 2022 and 2023 and the three months ended March 31, 2023 and 2024 was $1,201, $869, $931, $540 (unaudited) and $532, respectively. The total intrinsic value of options exercised during the years ended December 31, 2021, 2022 and 2023 and the three months ended March 31, 2023 and 2024 was $483, $0, $9, $0 (unaudited) and $0, respectively.

As of March 31, 2024, there was $1,192 of total unrecognized compensation costs related to non-vested options granted under the Company’s stock option plans excluding the market-based stock options that were granted to certain senior managers, including the Company’s executive officers. That cost is expected to be recognized over a weighted-average period of 1.45 years.

As of March 31, 2024, there was $4,125 of total unrecognized compensation costs related to non-vested options granted under the Company’s stock option plans for the market-based stock options that were granted to certain senior managers, including the Company’s executive officers. That cost is expected to be recognized over a weighted-average period of 7.97 years.

The Company estimates forfeitures at the time of valuation and reduces expenses ratably over the vesting period. This estimate is adjusted periodically based on the extent to which actual forfeitures differ, or are expected to differ, from the previous estimate.

[B] Restricted Stock Awards:

The Company grants restricted stock to employees, whereby the employees are contractually restricted from transferring the shares until they are vested. The stock is unvested at the time of grant, and, upon vesting, there are no legal restrictions on the stock. The fair value of each share is based on the Company’s closing stock price on the date of the grant. A summary of the non-vested shares for the years ended December 31, 2021, 2022, and 2023 and the three months ended March 31, 2024 is as follows:

SCHEDULE OF NON-VESTED RESTRICTED STOCK ACTIVITY

For the years ended December 31, 2021, 2022, and 2023 and the three months ended March 31, 2023 and 2024, the Company recorded $2,529, $1,347, $1,196, $214 (unaudited) and $340, respectively, of stock-based compensation expense in connection with the restricted stock grants. As of December 31, 2023 and March 31, 2024 there was $3,349 and $2,929, respectively, of total unrecognized compensation cost related to non-vested shares. That cost is expected to be recognized over a weighted-average period of 1.65 years.

[C] Restricted Stock Units:

For the years ended December 31, 2021, 2022 and 2023 and the three months ended March 31, 2023 and 2024 the Company recorded $203, $53, $0, $0 (unaudited), and $0, respectively, of stock-based compensation expense in connection with restricted stock units (“RSUs”) to employees. As of and subsequent to December 31, 2022, there were no vested or unvested RSUs outstanding.