Note 12 – Stockholders’ Equity

Shares authorized

Upon formation, the total number of shares of all classes of stock that the Company is authorized to issue is seventy-five million (75,000,000) shares of common stock, par value $0.001 per share.

Common stock

On March 23, 2023, the Company issued a fifty percent (50%) stock dividend of the Company’s common stock to its shareholders for a stock dividend of one share of common stock for every two shares of common stock held.

During the nine months ended September 30, 2023, the Company issued 75,434 shares of common stock, not including the abovementioned stock dividend.

On January 17, 2023, the Company retired the 400,000 shares (representing 600,000 shares of common stock after a fifty percent stock dividend adjustment on March 23, 2023, and then valued at $2,000,000. The value of $1,965,000 was determined several months later for a total of 1.3 million shares) obtained pursuant to a prior stock repurchase agreement as announced in a current report on October 7, 2022.

On February 13, 2023, the Company issued 62,250 shares (for consideration of $184,979, based on their share price on grant date of $4.03 and $4.27) to employees based on their Restricted Stock Award Agreements (see Employee stock-based compensation below).

On February 21, 2023, the Company issued 10,857 shares (for consideration of $41,401, based on their share price on grant date of $5.72) to a prior board member who exercised his options with cashless exercise.

On April 3, 2023, the Company issued 2,327 shares to round up the stock dividend effective on March 23, 2023.

During the nine months ended September 30, 2022, the Company issued 403,761 shares of common stock.

On April 4, 2022, the Company issued 181,723 shares of its common stock to Boustead Securities LLC (“Boustead”), which were for the warrants exercised by Boustead on September 7, 2021. The warrants were issued to Boustead in connection with the Company’s initial public offering with an exercise price of $4.16. The shares issued to Boustead were valued at $1,776,044 upon the cashless exercise option of the warrants.

On May 2, 2022, the Company issued 48,941 shares to consultants in exchange for professional services rendered. The shares were valued at $154,709 based on the closing price of the Company’s common stock on the dates that the shares were deemed earned, according to the terms of the related agreements.

On August 17, 2022, the Company issued 82,347 shares to two board members who exercised their options. The board members exercised a combined 107,500 options, and the shares were valued at $652,501 upon the cashless exercise option of the options.

On August 22, 2022, the Company issued 90,750 shares (for consideration of $642,789, based on their share price on grant date of $7.44) to employees based on the Restricted Stock Award Agreement (see Employee stock-based compensation).

As of September 30, 2023 and December 31, 2022, the Company had 64,771,817 shares and 65,296,383 shares of common stock issued and outstanding, respectively.

Treasury stock

On August 10, 2022, the Company entered a stock purchase agreement (the “Stock Purchase Agreement”) with a private shareholder to repurchase 400,000 shares (600,000 shares after a fifty percent stock dividend adjustment on March 23, 2023) of its common stock for $2,000,000. The private shareholder transferred the shares on October 4, 2022, forming a binding agreement, which the Company placed in treasury; and on October 6, 2022, the Company wired the first $1,000,000 of the purchase price. Subsequently, on July 14, 2023, the Company entered into an amendment to the Stock Purchase Agreement that increased the number of shares of its common stock the Company would purchase to 1,300,000 shares and revised the total purchase price of the shares to $1,965,000. The remaining $965,000 was paid on July 14, 2023. Upon receipt of the additional 900,000 shares, the Company also placed them in treasury. As of January 17, 2023, the Company retired the initial 400,000 shares (600,000 shares after a fifty percent stock dividend adjustment on March 23, 2023) and restored them to the status of authorized and unissued shares.

As part of the Company’s repurchase program, during the nine months ended September 30, 2023 the Company repurchased 233,040 shares of its common stock for $420,686 in the public market at average price of $1.80 and placed them in treasury.

As of September 30, 2023 and December 31, 2022, the Company had 1,183,040 and 400,000 treasury shares, respectively. The intention of the Company is to retire the additional 900,000 shares obtained pursuant to the amendment to the Stock Purchase Agreement along with the additional 233,040 shares repurchased during the nine months ended September 30, 2023.

Employee stock-based compensation

During the nine months ended September 30, 2023, the Company entered into employment contracts with three employees of its engineering staff. These employment contracts contained provisions for a total bonus of restricted stock grants valued at $50,000 based on the share price upon the date of completion of the performance metrics described in the employment contracts. The fair value of the above employee compensation was $16,250 (approximately 9,931 shares) as of September 30, 2023.

On February 11, 2022 (the “Vesting Date”), the Company entered into a restricted stock award agreement (the “Award Agreement”) with eight employees for 280,000 shares of the Company’s common stock subject to the terms and to the fulfillment of the conditions set forth in the Company’s equity incentive plan. The first 20% of the restricted shares were granted and vested on February 11, 2022. An additional 20% of the restricted shares will vest on each anniversary of the Vesting Date until the fourth anniversary of the Vesting Date. There were 51,000 shares granted as of February 13, 2023. The fair value of the above employee compensation was $136,904 as of September 30, 2023.

In November 2021, the Company entered into a one-year employment agreement with the then VP of Finance and Head of Investor Relations of the Company, pursuant to which the Company awarded a 10,000-share bonus consisting of shares of the Company’s common stock, which will be granted in blocks of 2,500 shares for every quarter certain performance metrics are achieved. The share price will be determined based on the closing price as of the last day of each quarter. Pursuant to the terms of the employment agreement, if the Company determined it was satisfied with the performance of the VP, his position would be promoted to Chief Financial Officer after the one-year anniversary. In November 2022, the Company entered into an amendment agreement to amend the performance metrics and extend the term. As of September 30, 2023, 7,500 shares have vested, collectively valued at $14,925.

In October 2022, the Company entered into an employee agreement with the VP of the Company, pursuant to which the Company awarded a 10,000-share bonus consisting of shares of the Company’s common stock, which will be granted in blocks of 2,500 shares every quarter. As of September 30, 2023, 7,500 shares have vested, collectively valued at $14,925.

During the nine months ended September 30, 2023 and 2022, the total employee stock-based compensation amount for all employees in the company, was $183,004 and $671,901, respectively.

Stock options

On August 6, 2019, each member of the Board was granted 45,000 options to purchase shares at $3.80 per share.

On January 4, 2021, each member of the Board was granted 22,500 options to purchase shares at $2.00 per share.

On December 31, 2021, each member of the Board was granted 22,500 options to purchase shares at $5.91 per share.

On December 31, 2022, each member of the Board was granted 22,500 options to purchase shares at $4.27 per share.

As of September 30, 2023, there were 615,063 options granted, 497,092 options vested and exercisable, 39,158 options unvested, and 536,249 outstanding stock options.

For the nine months ended September 30, 2023 and 2022, the Company’s stock option compensation expenses amounted to $400,208 and $652,501, respectively.

The fair value of the stock options listed above was determined using the Black-Scholes option pricing model with the following assumptions:

The following is a summary of the option activity from December 31, 2022 to September 30, 2023: