Note 9 – Stockholders’ Equity

Stock Dividend

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.

The Company followed paragraph ASC 505-20-25 in treating its stock dividend as a stock split due to the stock dividend being greater than 25% of the shares then outstanding. As such, on March 23, 2023 and April 3, 2023, the Company issued 21,592,164 stock dividends to its shareholders for a stock dividend of one share of common stock for every two shares of common stock issued and outstanding. The Company adhered to paragraph ASC 260-10-55-12, wherein it retroactively adjusted its statement of stockholders’ equity for all presented periods to incorporate the alteration in capital structure.

Common stock

On February 13, 2023, the Company issued 62,250 shares with a fair value of $149,404 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 to a prior board member who exercised his options with cashless exercise.

Treasury stock

On August 10, 2022, the Company entered a stock purchase agreement (the “Stock Purchase Agreement”) with a private shareholder to repurchase 600,000 shares 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 resulting in a $35,000 change in our obligation to purchase Treasury stock. 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 600,000 shares and restored them to the status of authorized and unissued shares.

Employee compensation

On February 11, 2022 (the “Vesting Date”), the Company entered into a restricted stock award agreements (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. The initial fair value of the awards on the date of grant was determined to be $2,942,800 which is being amortized over the 5 year vesting period. As of December 31, 2023 the unamortized amount of the award was $1,072,020. During the three months ended March 31, 2024 the Company amortized $89,335 of this amount leaving an unamortized balance of $982,685 at March 31, 2024. As of March 31, 2024, 135,000 of the shares had been vested and 88,000 of the shares had been forfeited.

The company has entered into two employment agreements that require the annual award of 15,000 shares of common stock to each of these employees to be vested on a quarterly basis. During the period ended March 31, 2024, 7,500 shares of common stock with a fair value of $3,075 had vested. In addition, the Company entered into another employment contract that 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. During the period the employee earned 6,098 shares with a fair value of $2,500 during the period ended March 31, 2024. As of March 31, 2024, 55,241 shares of common stock earned under these contracts have vested but not been issued.

During the three months ended March 31, 2024 and 2023, the total employee stock-based compensation amount for all employees in the Company was $94,910 and $149,404, respectively.

Stock options

On January 2, 2024, each member of the Board was granted 22,500 options to purchase shares at $1.50 per share with a fair value of $29,595. The options vest on a monthly basis over 1 year, and have a 10 year life. In the aggregate, 112,500 options were granted with a fair value of $147,975. During the three months ended March 31, 2023, the Company recognized $36,995 of compensation cost relating to the vesting of these options and $110,980 remained unvested which will be amortized over the remainder of 2024.  

For the three months ended March 31, 2024 and 2023, the Company’s stock option compensation expenses amounted to $36,995 and $133,403, respectively.

The fair value of the stock options issued during the periods 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, 2023 to March 31, 2024: