NOTE 12 – STOCK BASED COMPENSATION

Common Stock Options and Warrants

The Company maintains the 2016 Equity Incentive Plan (the "2016 Plan"), under which no additional awards may be granted following its termination on May 15, 2025. Outstanding awards granted under the 2016 Plan remain outstanding in accordance with their original terms.

The Company also maintains the 2025 Equity Incentive Plan (the "2025 Plan"), which was approved by shareholders on May 15, 2025 and authorizes the issuance of up to 6,000,000 shares of common stock pursuant to stock options, restricted stock and restricted stock unit awards. As of June 30, 2026, 2,686,561 shares remained available for future grants under the 2025 Plan.

The Company uses the Black-Scholes option pricing model to calculate the grant-date and modification-date fair value of an award, with the following assumptions for the six months period ended June 30, 2026: no dividend yield, expected volatility, based on the Company’s historical volatility, 83.6% to 87.9%, risk-free interest rate between 4.14% to 4.55% and expected option life of 10 years, which is based on the legal contractual life of the options.

The Black-Scholes option pricing model assumptions for the six months ended June 30, 2025 are as follows: no dividend yield, expected volatility, based on the Company’s historical volatility, 78.7% to 80.8%, risk-free interest rate between 4.18% to 4.48% and expected option life of 10 years, which is based on the legal contractual life of the options.

As of June 30, 2026, there was $1,326,211 of unrecognized compensation expense related to non-vested market-based share awards that is expected to be recognized through December of 2028. As of June 30, 2025, there was $1,709,499 of unrecognized compensation expense related to non-vested market-based share awards that is expected to be recognized through June 2028.

Modification of Equity Awards

During the three months ended June 30, 2026, the Company entered into consulting agreements with two former employees whose employment terminated during the period. Under the consulting agreements, the former employees will provide consulting services through December 30, 2026.

In connection with the consulting agreements, the Company modified certain outstanding stock options and unvested restricted stock awards ("RSAs") by permitting continued vesting through December 30, 2026. Stock options that were scheduled to vest after December 30, 2026 were forfeited. In addition, all unvested restricted stock units ("RSUs") held by the former employees were forfeited upon termination of employment in accordance with the terms of the applicable award agreements.

The Company evaluated the consulting arrangements under ASC 718 and recognized the entire incremental compensation cost associated with the modified awards on the modification date since the consulting services did not represent substantive future services. The net incremental compensation cost recognized as a result of the modifications totaled $386,347, all of which was recognized during the three and six months ended June 30, 2026. No unrecognized compensation cost related to the modified awards remained as of June 30, 2026.

Share-based compensation was recognized as follows:

The following tables summarize all stock option and warrant activity of the Company during the six months ended June 30, 2026:

The aggregate intrinsic value of options and warrants outstanding and exercisable as of June 30, 2026 were $33,917,186 and $28,984,445, respectively. The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and warrants and the closing stock price of $9.46 for the Company’s common stock on June 30, 2026.

During the six months ended June 30, 2026, 2,775,050 options with the aggregate intrinsic value of $19,423,075 were exercised for proceeds of $6,946,686. Of this amount, 200,000 options were exercised via cashless settlement. In addition, 402,500 warrants with the total intrinsic value of $3,590,300 were exercised for proceeds of $1,362,932, net of issuance costs of $25,694 during the period. 

Restricted Stock Awards and Units

The Company grants restricted stock units (“RSUs”) and restricted stock awards (“RSAs”) to employees and directors. RSUs represent the right to receive shares of common stock upon vesting, while RSAs are shares issued at the grant date that remain subject to forfeiture until vesting conditions are satisfied.

The grant-date fair value of RSAs and RSUs is based on the closing market price of the Company's common stock on the grant date and is recognized as stock-based compensation expense on a straight-line basis over the shorter of the requisite service period or the vesting period. Vesting terms range from immediate vesting to monthly or quarterly vesting schedules, with certain awards subject to cliff vesting provisions. 

Restricted stock activity during the six months ended June 30, 2026 is as follows:

As of June 30, 2026 and 2025, the unamortized value of the RSAs was $100,311 and $353,061, respectively. As of June 30, 2026 and 2025, the unamortized value of the RSUs was $8,025,287 and $708,487, respectively.

Performance Stock Units

During the six months ended June 30, 2025, the Company granted 2,187,501 performance stock units (PSUs) subject to both performance-based and service vesting requirements to the Company’s executives. The grant date fair value of the PSUs granted was $2,029,126, as determined by the Company’s closing common stock price on the date of the grant of $0.93 per share. For the three and six months ended June 30, 2025, the Company recorded $384,925 stock-based compensation expense related to the PSU vesting.

As of June 30, 2026, no PSUs were granted or remained outstanding, and no stock-based compensation expense related to PSUs was recognized during the three and six months ended June 30, 2026.