Note 10 – Stock Options

The Company adopted the 2022 Stock Incentive Plan (the “Plan”) effective September 30, 2022. The Plan provides for awards of stock options and restricted stock to officers, directors, key employees, and consultants. Under the Plan option prices are set by the Compensation Committee and may not be less than the fair market value of the stock on the grant date. The Company accounts for stock-based compensation awards in accordance with the provisions of ASC 718, Compensation—Stock Compensation, which addresses the accounting for employee stock options and requires that the cost of all employee stock options, as well as other equity-based compensation arrangements, be reflected in the financial statements over the vesting period based on the estimated fair value of the awards.

At March 31, 2024 and December 31, 2023, the Company had 7,950,000 options outstanding with vesting periods ranging from 2 to 5 years and exercise prices of approximately $0.087 per share. Subsequent to the end of the reporting period, a total of 1,800,000 options—consisting of 810,000 vested options and 990,000 unvested options—were forfeited by the former Chief Executive Officer and a former member of the board. In addition, the Board of Directors approved a resolution to modify the terms of the options granted to the former Chief Executive Officer to cancel any vested options not exercised within 30 days of termination for cause. The Company accounts for forfeitures when they occur; accordingly, a reduction in stock-based compensation expense of $59,602 will be recorded in the three months ending September 30, 2024.

Subsequent to the issuance of the previous financial statements, the Company conducted an examination of its accounting policies for stock-based compensation and determined certain awards were not properly expensed in prior periods due to the application of incorrect vesting periods and other computational errors. As a result, the cumulative stock-based compensation expense was understated by $23,015. In accordance with ASC 250-10-45-23, the Company has corrected this error by recording an adjustment to retained earnings as of January 1, 2024.

Total stock-based compensation was $63,327 for the three months ended March 31, 2024, and $249,952 for the year ended December 31, 2023. The Company will recognize the remaining $248,172 as follows: