SHARE-BASED COMPENSATION

3 Months Ended

Mar. 31, 2025

Share-Based Payment Arrangement [Abstract]

SHARE-BASED COMPENSATION

9. SHARE-BASED COMPENSATION

In August 2021, Limited adopted the 2021 Omnibus Equity Incentive Plan (the “Incentive Plan”). The Incentive Plan provides that the Company may grant Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, and Other Share-Based Awards to selected employees, directors, and independent contractors of the Company.

Each Award shall be exercisable at such time or times and subject to such terms and conditions set forth in the Incentive Plan, as shall be determined by the administrator in the applicable award agreement. Total shares authorized by the plan was 2,500,000. Awards under the Incentive Plan are exercisable for up to 10 years from the date of issuance. There are 268,256 remaining available shares to be issued under the Incentive Plan at March 31, 2025. The number of shares of Common Stock that are reserved and available for issuance under the Incentive Plan shall be subject to an annual increase on the first day of each calendar year beginning with the first January 1 following the effective date and ending with the last January 1 during the initial ten-year term of the Plan as defined in Section 4(a) of the Incentive Plan.

Options

The Company issued 608,500 options during the first quarter of 2025 for employees, directors and non-employees under the Incentive Plan. The options granted had an exercise price of $2.13 and $0.52 and expire on the ten-year anniversary of the grant date.

Modification of options

On January 3, 2025, the remuneration committee board of directors approved an amendment to 294,500 performance related previously unvested options issued to management, as the refocus of the Company meant that the options would not meet the vesting conditions that were set out. 294,500 replacement options were issued concurrently with time-based vesting conditions, the number of options issued and the exercise price remained the same at $2.13.

The fair value of the modified options at the date of modification was determined using the Black-Scholes option pricing model. The fair value of the performance based option charged immediately prior to the modification was $0 (as it was improbable that the vesting conditions would be met), so the incremental fair value is therefore equal to the fair value of the modified award (the value of the modified award compared to its prior zero value) and is recognized over the vesting period of the replacement award.

For the three months ended March 31, 2025, stock option activity for time-based options of the Company is as follows:

	Number of Time-Based Share Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding at January 1, 2025		550,711	$	1.36		7.87	$	7,390
Issued		608,500		1.56		9.87		—
Exercised		—		—		—		—
Expired/Forfeited		—		0.28		7.33		—
Outstanding at March 31, 2025		1,159,211	$	1.47		8.80	$	16,643
Vested and exercisable March 31, 2025		349,753	$	1.52		7.29	$	12,643

The Company issued 201,000 options during the first quarter of 2024 for employees, directors and non-employees under the Incentive Plan. The options granted had an exercise price of $0.49 and expire on the ten-year anniversary of the grant date.

For the three months ended March 31, 2024, stock option activity for time-based options of the Company is as follows:

	Number of Time-Based Share Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding at January 1, 2024		366,615		$	1.82		8.14	$	15,686
Issued		201,000			0.49		9.95		—
Exercised		—			—		—		—
Expired/Forfeited		(879	)		0.28		7.33		—
Outstanding at March 31, 2024		566,736		$	1.35		5.10	$	—
Vested and exercisable March 31, 2024		284,611		$	1.78		7.86	$	—

The fair value of the modified options was determined using the same models and principles as described above.

For the three months ended March 31, 2025, stock option activity for performance-based options of the Company is as follows:

	Number of Performance- Based Share Options			Weighted Average Exercise Price			Weighted Average Remaining Contractual Life (in years)			Aggregate Intrinsic Value
Outstanding at January 1, 2025		894,500		$	1.41			8.11		$	—
Issued		—			—			—			—
Exercised		—			—			—			—
Expired/Forfeited		(294,500	)		(2.13	)		(6.95	)		—
Outstanding at March 31, 2025		600,000		$	1.06			6.82		$	—
Vested and exercisable March 31, 2025		—			—			—			—

For the three months ended March 31, 2024, stock option activity for performance-based options of the Company are as follows:

	Number of Performance- Based Share Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding at January 1, 2024		894,500	$	1.41		8.11	$	—
Issued		—		—		—		—
Exercised		—		—		—		—
Expired/Forfeited		—		—		—		—
Outstanding at March 31, 2024		894,500	$	1.41		7.86	$	—
Vested and exercisable March 31, 2024		—		—		—		—

The aggregate intrinsic value is calculated as the difference between the estimated fair value of the underlying common stock as of March 31, 2025 and the option exercise price.

Total share-based compensation was approximately $18,107 and $18,168, respectively, for the three months ended March 31, 2025 and 2024, respectively.

Total share-based compensation expense is included in General and Administrative expenses on the Condensed Consolidated Statement of Operations and Other Comprehensive Income.

The weighted average grant date fair value for stock options granted during the three months ended March 31, 2025 is $0.10. The weighted average grant date fair value for stock options granted during the three months ended March 31, 2024 is $0.49. The performance-based and time-based stock options are equity-classified.

The Company uses the Black-Scholes option pricing model to estimate the fair value of the option awards. The table below summarizes the resulting weighted average inputs used to calculate the estimated fair value of options awarded for the three months ended March 31, 2025 and 2024.

	Three Months Ended March 31, 2025			Three Months Ended March 31, 2024
Risk-free interest rate		3.98 to 4.11	%		1.80
Expected dividend yield		—			—
Expected term		5 years			5 years
Expected volatility		50.92 to 52.84	%		53.43

The risk-free interest rate assumption is determined using the yield currently available on U.S. Treasury zero- coupon issues with a remaining term commensurate with the expected term of the award. The Company has historically been a private company and lacks company-specific historical and implied volatility information. Management has estimated expected volatility based on similar public companies. Expected life of the option represents the period of time options are expected to be outstanding. The estimate for dividend yield is 0% because the Company has not historically paid, and does not intend to pay, a dividend on common stock in the foreseeable future.

As of March 31, 2025, there was $521,108 unrecognized compensation expense related to options. $122,554 of this cost is subject to time-based conditions, and is to be recognized over a period of approximately 3.32 years. The remaining $398,555 of unrecognized compensation expense relates to performance-based conditions for unvested options. These costs are expected to be recognized over the required service period once the performance condition has occurred or becomes probable. Compensation costs related to the performance stock options are evaluated at each reporting period and subsequently adjusted for changes in the expected outcomes of the performance conditions.

As of March 31, 2024, there was $822,652 unrecognized compensation expense related to options. $129,314 of this cost is subject to time-based conditions, and is to be recognized over a period of approximately 4.0 years. The remaining $693,338 of unrecognized compensation expense relates to performance-based conditions for unvested options. These costs are expected to be recognized over the required service period once the performance condition has occurred or becomes probable. Compensation costs related to the performance stock options are evaluated at each reporting period and subsequently adjusted for changes in the expected outcomes of the performance conditions.

Warrants

There were no warrants issued during the three months ended March 31, 2025 or 2024.

For the three months ended March 31, 2025, warrant activity of the Company are as follows:

	Number of shares		Weighted Average Exercise Price		Weighted average remaining contractual life (in years)		Aggregate Intrinsic Value
Outstanding at January 1, 2025		350,000	$	1.06		7.07	$	—
Issued		—		—		—		—
Exercised		—		—		—		—
Expired/Forfeited		—		—		—		—
Outstanding at March 31, 2025		350,000	$	1.06		6.82	$	—

For the three months ended March 31, 2024, warrant activity of the Company are as follows:

	Number of shares		Weighted Average Exercise Price		Weighted average remaining contractual life (in years)		Aggregate Intrinsic Value
Outstanding at January 1, 2024		350,000	$	1.06		8.07	$	—
Issued		—		—		—		—
Exercised		—		—		—		—
Expired/Forfeited		—		—		—		—
Outstanding at March 31, 2024		350,000	$	1.06		7.82	$	—
Vested and exercisable March 31, 2024		—		—		—		—

There was no share-based compensation expense recognized during the three months ended March 31, 2025 and 2024 for warrants.

As of March 31, 2025 and 2024, there was $232,490 of total performance-based unrecognized compensation costs related to unvested common stock warrants. These costs are expected to be recognized once the performance condition has occurred or becomes probable.