NOTE 4 — STOCK-BASED COMPENSATION

The Company has two equity incentive plans: the 2015 Stock Option Plan, as amended (the “2015 Plan”) and the 2021 Omnibus Equity Incentive Plan (the “2021 Plan”). As of March 31, 2022, there were options to purchase 3,638,750 shares of the Company’s common stock outstanding to certain executives, key employees and consultants under the 2015 Plan, of which 135,000 were issued during the three months ended March 31, 2022. Additional options may be issued under the 2015 Plan as outstanding options are forfeited, subject to a maximum 6,000,000 available for issuance under the 2015 Plan. The 2021 Plan provides for the grant of up to 1,000,000 incentive stock options, nonqualified stock options, stock awards, restricted stock awards, restricted stock units and/or stock appreciation rights to employees, consultants and directors. For the quarter ended March 31, 2022, there had been issued 47,500 shares of common stock as directors fees under the 2021 Plan.

Effective January 1, 2021, each non-employee director of the Company (other than the Chairman of the Board) and Board advisor were eligible to receive of $75,000 annually, to be paid quarterly $12,500 in cash and $6,250 in common stock.  The Chairman of the Board is eligible to receive $100,000 annually, to be paid quarterly $12,500 in cash and $12,500 in common stock.   Effective May 18, 2021, each non-employee director of the Company (other than the Chairman of the Board) and Board advisor are eligible to receive of $110,000 annually, to be paid quarterly $12,500 in cash and $15,000 in common stock.  The Chairman of the Board is eligible to receive $140,000 annually, to be paid quarterly $12,500 in cash and $22,500 in common stock. All payments were and are pro-rated for partial service.

On April 12, 2021, pursuant to an employment agreement entered into on March 15, 2021, with Linda Tharby, the Company’s President and Chief Executive Officer, the Company issued three restricted stock awards for an aggregate 1,000,000 shares of common stock for an aggregate stock price of $3,310,000 and each vesting subject to employment on the respective vesting date. These awards were issued as an inducement for her employment.

2015 STOCK OPTION PLAN, as amended

Time Based Stock Options

The per share weighted average fair value of stock options granted during the three months ended March 31, 2022 and March 31, 2021 was $2.45 and $3.06, respectively.  The fair value of each award is estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in the three months ended March 31, 2022 and March 31, 2021. Historical information was the primary basis for the selection of the expected volatility, expected dividend yield and the expected lives of the options.  The risk-free interest rate was selected based upon yields of the U.S. Treasury issues with a term equal to the expected life of the option being valued. We have recognized tax benefits associated with stock-based compensation of $49,406 and $43,067 for the three months ended March 31, 2022 and 2021, respectively.

Schedule of time based stock option

The following table summarizes the status of the 2015 Plan with respect to time based stock options:

Schedule of stock option plan

Total stock-based compensation expense was $524,670 and $1,086,681 for the three months ended March 31, 2022, and 2021, respectively. Cash received from option exercises for the three months ended March 31, 2022, and 2021 was $0 and $1,230,000, respectively.

The weighted-average grant-date fair value of options granted during the three months ended March 31, 2022, and 2021 was $0.3 million and $3.8 million, respectively.  There were 75,000 options exercised during the three months ended March 31, 2022, and 1.0 million during the three months ended March 31, 2021.

The following table presents information pertaining to options outstanding at March 31, 2022:

Schedule of information pertaining to options outstanding

As of March 31, 2022, there was $5,861,444 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the 2015 Plan.  That cost is expected to be recognized over a weighted-average period of 46 months.  The total fair value of shares vested as of March 31, 2022, and March 31, 2021, was $2,815,943 and $1,230,434, respectively.

Performance Based Stock Options

There were no stock options granted during the three months ended March 31, 2022, and 2021.

The following table summarizes the status of the 2015 Plan with respect to performance-based stock options:

Schedule of performance base options outstanding

Total performance stock-based compensation expense totaled zero and ($408,747) for the three months ended March 31, 2022, and 2021, respectively. All performance-based stock options were forfeited and there was no unrecognized compensation cost remaining.

RESTRICTED STOCK AWARDS

On April 12, 2021, pursuant to an employment agreement entered into on March 15, 2021, with Linda Tharby, the Company’s President and Chief Executive Officer and as an inducement to her employment, the Company issued three restricted stock awards for an aggregate 1,000,000 shares of common stock for an aggregate stock price of $3,310,000 and each vesting subject to employment on the respective vesting date. The following table summarizes the activities for our unvested restricted stock awards for the three months ended March 31, 2022, and 2021.

Schedule of activities for our unvested restricted stock awards

As of March 31, 2022, there was $2,129,339 of unrecognized compensation cost related to unvested employee restricted shares. This amount is expected to be recognized over a weighted-average period of 39 months. We have recognized tax benefits associated with restricted stock award compensation of $35,781 and zero for the three months ended March 31, 2022 and 2021 respectively.

Schedule of restricted stock units