Sharebased Compensation

9 Months Ended

Sep. 30, 2023

Sharebased Compensation

Share-based Compensation

13. Share-based Compensation

Share-based compensation (including restricted stock awards) represents both stock option-based expense and stock grant expense. The following table sets forth the composition of stock compensation expense included in general and administrative expense for the periods then ended:

	THREE MONTHS ENDED				NINE MONTHS ENDED
	SEPTEMBER 30,				SEPTEMBER 30,
	2023		2022		2023		2022
	(Unaudited)
Restricted share-based compensation expense	$	276,570	$	115,141	$	512,140	$	384,267
Non-qualified option share-based compensation expense		23,277		-		23,277		-
Total share-based compensation before taxes	$	299,847	$	115,141	$	535,417	$	384,267

The Company’s stock incentive plan is administered by the Compensation Committee of the Board of Directors and authorizes the grant or award of incentive stock options (ISO), nonqualified stock options (NQSO), restricted stock awards (RSA), restricted stock units, stock appreciation rights, dividend equivalent rights, performance unit awards and phantom shares. The Company issues new shares of common stock upon the exercise of stock options.

Restricted Stock 

The Company records the fair value of all restricted stock shares based on the grant date fair value and amortizes stock compensation on a straight-line basis over the vesting period. Restricted stock shares are issued when vested and included in the total number of common shares issued and outstanding. During the three and nine month period ended September 30, 2023, the Company granted 628,572 restricted stock shares. During the three and nine month periods ended September 30,  2022, the Company granted 153,903 RSAs.

Stock Options 

The Company estimates the fair value of nonqualified stock awards using a Black-Scholes Option Pricing model (“Black-Scholes model”). The fair value of each stock award is estimated on the date of grant using the Black-Scholes model, which requires an assumption of dividend yield, risk free interest rates, volatility, and expected option life. The risk-free interest rates are based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. Expected volatilities are based on the historical volatility of our common stock over the expected option term. The expected term of options granted is calculated using the simplified method. The Company recognizes forfeitures as they occur. There were 288,570 stock option awards granted during the three and nine month period ended September 30, 2023. There were no stock option awards granted during the three and nine month period September 30, 2022.

Option pricing model assumptions for NQSO awards granted were valued using the following assumptions for the years then ended as set forth below:

	THREE MONTHS ENDED				NINE MONTHS ENDED
	SEPTEMBER 30,				SEPTEMBER 30,
	2023		2022		2023		2022
Stock options granted		288,570		--		288,570		--
Expected dividend yield		0%		--		0%		--
Expected volatility		61.6%-62.2%		--		61.6%-62.2%		--
Risk-free interest rate		4.1%		--		4.1%		--
Term		4 years		--		4years		--

At September 30, 2023, the Company had approximately $1.2 million of total unrecognized share-based compensation expense, net of estimated forfeitures, related to share-based compensation that will be recognized over the weighted average remaining period of 1.0 years.

Long-Term Incentive Plan

The Company maintains a long-term incentive plan (LTIP) that covers the period of January 1, 2023 through January 1, 2026. The plan was approved by the Board of Directors in August 2023. The LTIP has two components of equity-based compensation. The first is 250,000 RSUs that will be awarded to management, of which 83,333 will be issued on January 1 of the years 2024, 2025, and 2026. The second is 250,000 performance based restricted stock units (PSRUs) that would vest upon meeting, by January 1, 2026, certain revenue and adjusted EBITDA performance targets. As of September 30, 2023, the Company has not awarded the RSUs or PRSUs under this plan.