Note 9 - Shareholders' Equity, Redeemable Convertible Preferred Stock, Options and Warrants

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Equity [Text Block]

NOTE 9 – SHAREHOLDERS’ EQUITY, REDEEMABLE CONVERTIBLE PREFERRED STOCK, OPTIONS AND WARRANTS

Warrants

On February 14, 2022, 515,000 Class M Warrants were exercised for an exercise price of $0.12 per share. The Company received $61,800 of proceeds as a result of the exercise. On February 17, 2022 the 3,625,000 remaining unexercised Class M Warrants expired. On May 12, 2022, the 2,925,000 remaining unexercised Class N Warrants expired.

The following table summarizes warrant activity for the years ended December 31, 2023 and 2022:

Warrants	Outstanding Shares			Weighted Average Exercise
Outstanding at December 31, 2021		7,065,000		$	0.11
Granted		—			—
Exercised		(515,000	)		0.12
Forfeited		(6,550,000	)		0.11
Outstanding at December 31, 2022		—			—
Granted		—			—
Exercised		—			—
Forfeited		—			—
Outstanding at December 31, 2023		—		$	—

At December 31, 2023 and  December 31, 2022 there were no outstanding warrants.

Mandatorily Redeemable Convertible Preferred Stock

The Company is authorized to issue up to 5,000,000 shares of preferred stock, par value $0.01 per share. The Board is authorized to set the distinguishing characteristics of each series prior to issuance, including the granting of limited or full voting rights, rights to the payment of dividends and amounts payable in event of liquidation, dissolution or winding up of the Company.

At December 31, 2021, there were 675 shares of the Series B Convertible Redeemable Preferred Stock (the “Series B Preferred Stock”) outstanding with a mandatory redemption date of May 2022 at $1,000 per share, or $675,000 in aggregate redemption value. The Series B Preferred Stock were convertible into common stock at a conversion price of $2.00 per share. These preferred shares carried no dividend preferences. Due to the mandatory redemption provision, the Series B Preferred Stock were classified as a liability in the accompanying consolidated balance sheets. In 2021, 175 shares of Series C Preferred Stock were converted into shares of common stock. On May 31, 2022, the Company paid with shares of the Company’s common stock all 675 outstanding Series B Preferred Stock outstanding with a mandatory redemption date of May 2022 at $1,000 per share or $675,000. The May 31, 2022 average price of the Company’s common stock was $0.08 per share. The Company issued 8,437,500 shares of common stock to satisfy the $675,000 redemption amount.

At December 31, 2022 and December 31, 2023, there were 4,063 total shares of the Series C Preferred Stock outstanding. The Series C Preferred Stock are convertible at the option of the investors at any time into shares of the Company's common stock at an initial conversion price equal to $0.10 per share, subject to adjustment. At any time after February 17, 2019, if the volume-weighted average closing price of the Company’s common stock over a period of 90 consecutive trading days is greater than $0.25 per share, the Company may redeem all or any portion of the outstanding Series C Preferred Stock at the original purchase price per share ($1,000) plus any accrued and unpaid dividends, payable in shares of common stock. All outstanding shares of Series C Preferred Stock were to be redeemed by the Company on February 17, 2022 at the original purchase price per share, payable in cash or shares of common stock, at the option of the holder. In February 2022, based on approval of a majority of the Preferred C Holders, the Company extended the redemption date of the Series C Preferred Stock to February 17, 2023. In December 2022, based on approval of a majority of the Preferred C Holders, the Company extended the redemption date of the Series C Preferred Stock to February 17, 2025. Holders of Series C Preferred Stock do not have any voting rights, except as required by law and in connection with certain events as set forth in the Statement of Designation of the Series C Preferred Stock.

The Company pays dividends on the Series C Preferred Stock in February each year. Dividends payable totaled $243,780 in February 2023 and February 2022. Some holders of the Series C Preferred Stock elected to settle their dividend payments with shares of the Company’s common stock in lieu of cash. The Company issued 2,266,500 shares of common stock in lieu of a dividend payment of $90,660 in 2023 and 2,271,980 shares of common stock in lieu of a dividend payment of $204,480 in 2022. $153,120 of dividend payable was settled with cash in 2023 and $39,300 was settled with cash in 2022.

The outstanding 4,063 shares of Series C Preferred Stock originated as follows:

On February 17, 2017, the Company entered into subscription agreements with certain investors, including two of the Company’s directors, for the sale of (i) an aggregate of 3,433 shares of Series C Preferred Stock, and (ii) Class M warrants to purchase an aggregate of 17,165,000 shares of the Company’s common stock (the Class M Warrants), for gross proceeds of $3,433,000. The Series C Preferred Stock accrues dividends at a rate of 6% per annum, payable annually on February 17^th of each year, commencing on February 17, 2018.

The Class M Warrants were immediately exercisable at an exercise price of $0.12 per share, subject to adjustment as set forth in the warrant, and expired in February 2022.

The Company allocated the proceeds to the Series C Preferred Stock and Class M Warrants based on their relative fair value, which resulted in $2,895,379 being allocated to the Series C Preferred Stock and $537,621 being allocated to the Class M Warrants. The allocated Class M Warrant value was recorded as a discount to the Series C Preferred Stock and will be amortized to interest expense over the five-year life of the warrants. At December 31, 2022, the balance of the discount to the Series C Preferred Stock was $13,440 and the net carrying value of these 3,433 shares of Series C Preferred Stock was $3,419,560. At December 31, 2023, the balance of the discount to the Series C Preferred Stock was $0 and the net carrying value of these 3,433 shares of Series C Preferred Stock was $3,433,000.

On March 24, 2017, the Company entered into an Amendment to the 8% Convertible Notes (the Amendment), pursuant to which the 8% Convertible Notes (the Notes) issued by the Company in July 2012 were amended to give noteholders certain additional rights. Pursuant to the Amendment, the Notes were modified to provide each holder the right, at the holder’s option and exercisable prior to May 12, 2017, to convert all or any portion of the principal amount of the Notes, plus accrued but unpaid interest, into shares of Series C Preferred Stock at a conversion price of $1,000 per share. Holders that elected to convert their Notes into Series C Preferred Stock received a Class N Warrant to purchase up to 3,750 shares of the Company’s common stock for each share of Series C Preferred Stock received upon conversion of the Notes, with each Warrant having a five-year term, a cashless exercise feature, and an exercise price of $0.10 per share of common stock. On May 12, 2017, the Company completed the retirement of $1,835,000 of the Notes in early cash redemptions, and $780,000 of the Notes were converted into an aggregate of 780 shares of Series C Preferred Stock and Class N Warrants to purchase an aggregate of 2,925,000 shares of the Company’s common stock. In 2021, 150 shares of Series C Preferred Stock were converted into shares of common stock.

The Class N Warrants were immediately exercisable at an exercise price of $0.10 per share, subject to adjustment as set forth in the warrant, and expired in May 2022.

The Company allocated the proceeds to the Series C Preferred Stock and Class N Warrants based on their relative fair value, which resulted in $675,947 being allocated to the Series C Preferred Stock and $104,053 being allocated to the Class N Warrants. The allocated Class N Warrant value was recorded as a discount to the Series C Preferred Stock and will be amortized to interest expense over the five-year life of the warrants. At December 31, 2022, the balance of the discount to the Series C Preferred Stock was $4,737 and the net carrying value of 630 outstanding shares of Series C Preferred Stock was $625,263. At December 31, 2023, the balance of the discount to the Series C Preferred Stock was $0 and the net carrying value of 630 shares of Series C Preferred Stock was $630,000.

Employee Stock Purchase Plan

In September 2004, the Company’s Board approved an employee stock purchase plan for an aggregate of up to 2,000,000 shares of the Company’s common stock. The plan allows employees to deduct up to 15% of their salary or wages each pay period to be used for the purchase of common stock at a discounted rate. The common shares will be purchased at the end of each three-month offering period or other period as determined by the Board. The plan is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code. An amendment and restatement of the plan was approved in July 2020 by the Company’s shareholders, which increased the number of shares available for purchase by 3,000,000 shares. At December 31, 2023 there were 2,224,544 shares available under the employee stock purchase plan.

During 2023 and 2022, the Company issued 316,866 and 245,081 shares of common stock to employees for proceeds of $8,398 and $14,771, respectively, in accordance with the employee stock purchase plan.

2015 Incentive Plan

In April 2015, the Company’s Board of Directors approved the International Isotopes Inc. 2015 Incentive Plan (as amended, the “2015 Plan”) which was subsequently approved by the Company’s shareholders in July 2015. The 2015 Plan was amended and restated in July 2018 to increase the number of shares authorized for issuance under the 2015 plan by an additional 20,000,000 shares. The 2015 Plan provides for the grant of incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and units, and other stock or cash-based awards.  The 2015 Plan amends and restates the Company’s Amended and Restated 2006 Equity Incentive Plan (the “2006 Plan”).

The 2015 Plan authorizes the issuance of up to 80,000,000 shares of common stock, plus 11,089,967 shares authorized, but not issued under the 2006 Plan. Unless earlier terminated, the 2015 Plan will terminate on July 13, 2025. At December 31, 2023 there were 20,292,546 shares available for issuance under the 2015 Plan.

Non-Vested Stock Grants

Pursuant to an employment agreement with its Chief Executive Officer, the Company awarded 560,000 fully vested shares of common stock to its then Chief Executive Officer in February 2023 under the 2015 Plan. The number of shares awarded was based on a $28,000 stock award using a price of $0.05 per share. The employment agreement provides that the number of shares issued will be based on the average closing price of common stock for the 20 trading days prior to issue date but not less than $0.05 per share. Compensation expense recorded pursuant to this stock grant was $22,400, which was determined by multiplying the number of shares awarded by the closing price of the common stock on February 28, 2023, which was $0.04 per share. The Company withheld 216,440 shares of common stock to satisfy the employee’s payroll tax obligations in connection with this issuance. The net shares issued on February 28, 2023 totaled 343,560.

Pursuant to an employment agreement with its Chief Executive Officer, the Company awarded 307,692 fully vested shares of common stock to its Chief Executive Officer in February 2022 under the 2015 Plan. The number of shares awarded was based on a $28,000 stock award using a price of $0.091 per share. The employment agreement provides that the number of shares issued will be based on the average closing price of common stock for the 20 trading days prior to issue date but not less than $0.05 per share. Compensation expense recorded pursuant to this stock grant was $27,692, which was determined by multiplying the number of shares awarded by the closing price of the common stock on February 28, 2021, which was $0.09 per share. The Company withheld 120,461 shares of common stock to satisfy the employee’s payroll tax obligations in connection with this issuance. The net shares issued on February 28, 2022 totaled 187,231.

Stock Options

A summary of the stock options issued under the Company’s equity plans is as follows:

Stock Options	Outstanding Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Average Intrinsic Value
Outstanding at December 31, 2021		20,777,500			0.06				627,615
Granted		8,150,000			0.09
Exercised		(1,200,000	)		0.04				57,000
Forfeited		(1,734,000	)		0.08
Outstanding at December 31, 2022		24,993,500			0.07				—
Granted		3,100,000			0.04
Exercised		—
Forfeited		(3,306,000	)		0.08
Outstanding at December 31, 2023		24,787,500			0.05		5.4		17,000
Exercisable at December 31, 2023		19,372,500		$	0.05		4.6	$	16,000

The total intrinsic value of stock options outstanding at December 31, 2023 was $ 16,000. The intrinsic value for stock options outstanding is calculated as the amount by which the quoted price of $0.04 of the Company’s common stock as of the end of 2023 exceeds the exercise price of the options.

The Company recognized $199,554 and $280,393 of compensation expense related to these options for the years ended December 31, 2023 and 2022, respectively. At December 31, 2023, the remaining compensation expense was $99,768 and will be recognized over 1.71 years.

During the year ended December 31, 2023, no qualified stock options were exercised.

In March 2022, 1,000,000 qualified stock options were exercised under a cashless exercise. The company withheld 388,889 shares to satisfy the exercise price and issued 611,111 shares of common stock. The options exercised were granted under the 2015 Plan, and, accordingly, there was not any income tax effect in the condensed consolidated financial statements for the year ended December 31, 2023.

In August 2022, 200,000 qualified stock options were exercised under a cashless exercise. The company withheld 162,163 shares to satisfy the exercise price and issued 37,837 shares of common stock. The options exercised were granted under the 2015 Plan, and, accordingly, there was not any income tax effect in the condensed consolidated financial statements for the year ended December 31, 2023.

During the year ended December 31, 2023, the Company granted an aggregate of 3,100,000 qualified stock options to 32 of its employees. These options vest over a five-year period with the first vesting at the date of grant and expiration at ten-year anniversary for all grants. The exercise price for these granted options was $0.04 and $0.06 per share. The options issued during the year ended December 31, 2023 have a fair value of $82,176, as estimated on the date of issue using the Black-Scholes options pricing model with the following weighted-average assumptions: risk free interest rate of 3.94% to 4.26%, expected dividend yield rate of 0%, expected volatility of 68.65% to 79.21% and an expected life between 5 and 7 years.

During the year ended December 31, 2022, the Company granted an employee 1,000,000 qualified stock options with an exercise price of $0.10 per share and 25,000 qualified stock options with an exercise price of $0.08 per share to one of its employees and a total of 125,000 qualified stock options with an exercise price of $0.03 per share to two other employees. These options vest over a five-year period with the first vesting at the one-year anniversary of the grant and expiration at ten-year anniversary for all grants. On February 21, 2022, the Compensation Committee granted 3,000,000 qualified stock options to the Company’s executive officers and 4,000,000 non-qualified stock options to members of the Board. The exercise price for these options was $0.09 per share. 2,000,000 of the options granted to an executive officer vest one half immediately and one half at the one-year anniversary of the grant. The remaining executive officer and board member options vest one fourth immediately and one fourth each subsequent year. All these granted options expire at the ten-year anniversary of the grant. The options issued during the year ended December 31, 2022 have a fair value of $442,295 as estimated on the date of issue using the Black-Scholes options pricing model with the following weighted-average assumptions: risk free interest rate of 1.37% to 4.14%, expected dividend yield rate of 0%, expected volatility of 65.19% to 70.09% and an expected life between 5 and 7.5 years.

All options exercised were issued under a qualified plan and accordingly, there is no income tax effect in the accompanying financial statements.

Restricted Stock Units

A summary of the non-vested restricted stock units issued under the Company’s equity plans is as follows:

Non-Vested Restricted Stock Units	Number of restricted stock units		Weighted average grant-date fair value
Outstanding at December 31, 2020	—		$ —
Granted	—
Exercised	—
Forfeited	—
Outstanding at December 31, 2021	—
Granted	—
Vested	—
Forfeited / Cancelled	—
Outstanding at December 31, 2022	—
Granted	7,250,000		0.04
Vested	(250,000	)	0.04
Forfeited / Cancelled	—
Outstanding at December 31, 2023	7,000,000		$ 0.04

The Company recognized $121,202 and $0 of compensation expense related to these restricted stock units ("RSU") for the years ended December 31, 2023 and 2022, respectively. At December 31, 2023, the remaining compensation expense was $168,798 and will be recognized over 1.72 years.

On March 3, 2023, the Compensation Committee of our Board of Directors approved the cancellation of 1,000,000 outstanding stock options held by a member of the Board in exchange for the grant of 750,000 RSUs. The RSUs vest over a three-year period beginning on the grant date.

On May 8, 2023, pursuant to an executive employment agreement entered into with its newly appointed President, the Company granted 6,500,000 RSUs to its President. 1,500,000 RSUs vest on April 17, 2024, 2,000,000 RSUs vest on April 17, 2025, and 3,000,000 RSUs vest on April 17, 2026. Each RSU represents the contingent right to receive one share of the Company’s common stock.

On September 5, 2023, pursuant to an employment agreement with its President, the Company awarded 2,500,000 fully vested RSUs under the 2015 Plan to the Company's President upon his promotion to Chief Executive Officer. Compensation expense recorded pursuant to this RSU award was $150,000, which was determined by multiplying the number of shares awarded by the closing price of the common stock on September 5, 2023, which was $0.06 per share. The Company withheld 778,972 shares of common stock to satisfy payroll tax obligations in connection with this issuance. The net shares issued on September 5, 2023 totaled 1,721,028.