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STOCKHOLDERS’ EQUITY
 12 Months Ended
Dec. 31, 2023
Equity [Abstract]  
STOCKHOLDERS’ EQUITY

NOTE 10 – STOCKHOLDERS’ EQUITY

 

Non-Compensatory Stock Options

 

Effective December 18, 2017, the Company completed an Agreement and Plan of Merger whereby a newly formed wholly owned subsidiary merged with and into KonaTel Nevada, and under which KonaTel Nevada was the surviving corporation and became a wholly owned subsidiary of the Company. Mr. McEwen was the sole shareholder of KonaTel Nevada and received merger consideration of 13,500,000 shares of the Company’s common stock and 1,500,000 non-compensatory options to acquire shares of the Company’s Common Stock under the merger, at an exercise price of $0.22 per share, vesting quarterly, from March 18, 2018, to December 18, 2019. See NOTE 11 below.

 

In 2023, D. Sean McEwen, the Chairman and CEO of the Company, exercised 750,000 equity stock options for 750,000 shares of common stock at a price of $0.22 per share.

 

Stock Compensation

 

The Company offers incentive stock option equity awards to directors and key employees. Options vest in tranches and typically expire in five (5) years. During the year ended December 31, 2023, and 2022, the Company recorded options expense of $257,557 and $692,138, respectively. The option expense not taken as of December 31, 2023, is $1,771,133, with a weighted average term of 3.27 years.

 

In 2023, 3,245,000 share incentive stock options were granted to two (2) independent members of the Board of Directors and twelve (12) employees. Each independent Board member was granted 25,000 shares in the first and second quarter of 2023, for a total of 50,000 shares each. Three (3) key employees were granted a total of 2,050,000 share options. An independent member of the Board of Directors was granted 750,000 share options, and a total of 345,000 share options were granted among nine (9) employees. During the year ended December 31, 2023, 200,000 shares were exercised by two (2) independent members of the Board of Directors. During the year ended 2023, 700,000 partially vested share options were forfeited by two (2) key employees of the Company. The Aggregate Intrinsic Value is based on the market value of the Company’s common stock of $0.89 on December 31, 2023.

 

The estimated grant date fair value of stock option grants was calculated using the Black-Scholes-Merton option-pricing model using the following assumptions:

 

   2023   2022 
Weighted average volatility   181.29%   192.71%
Weighted average expected term (years)   5.00    5.00 
Risk free interest rate   4.53%   1.90%
Expected dividend yield   —      —   

 

The following table represents incentive stock option activity as of and for the year ended December 31, 2023:

 

    Number of   Weighted Average   Weighted Average   Aggregate 
    Shares   Exercise Price   Remaining Life   Intrinsic Value 
                  
Options Outstanding – December 31, 2022    4,405,000   $.59    3.22   $2,260,138 
Granted    3,245,000    .86           
Exercised    (950,000)   .53           
Forfeited    (700,000)               
Options Outstanding – December 31, 2023    6,000,000   $.75    3.69   $872,463 
                      
Exercisable and Vested, December 31, 2023    641,155   $.50    1.58   $247,547 

 

The following table represents stock option activity as of and for the year ended December 31, 2022:

 

   

Number of

Shares

  

Weighted Average

Exercise Price

  

Weighted Average

Remaining Life

  

Aggregate

Intrinsic Value

 
                  
Options Outstanding: December 31, 2021    4,260,000   $.37    2.25   $5,862,938 
Granted    900,000   $1.16           
Exercised    (625,000)   .17         920,750 
Forfeited    (130,000)               
Options Outstanding: December 31, 2022    4,405,000   $.59    3.22   $2,260,138 
                      
Exercisable and Vested: December 31, 2022    1,722,041   $.36    1.80   $1,271,653 

 

In 2022, 900,000 share incentive stock options were granted to two (2) independent members of the Board of Directors and two (2) key employees. Each independent Board member was granted 25,000 shares per quarter of service in 2022, for a total of 100,000 shares each. The key employees were granted 700,000 share options as part of their employment agreements. During the year ended December 31, 2022, 625,000 shares were exercised by three (3) former employees of the Company, who received these options as part of their employment agreements. During 2022, 130,000 share options were forfeited, of which 50,000 options were forfeited by an independent consultant, and 80,000 options were forfeited by two (2) former employees of the Company. The Aggregate Intrinsic Value is based on the market value of the Company’s common stock of $1.10 on December 31, 2022.