7. Stock-based Compensation

2015 Equity Incentive Plan

The Company has 5,104,915 shares of common stock authorized and reserved for issuance under its 2015 Equity Incentive Plan, as amended (the “2015 Plan”). The reserve may be increased annually by the Board of Directors up to 5% of the Company’s outstanding common stock as of the immediately preceding December 31. The 2015 Plan also provides for customary anti-dilution adjustments in the event of stock splits or other changes in the Company’s capital structure.

Shares subject to awards that expire, are forfeited, canceled or repurchased become available for future grant under the 2015 Plan. However, shares withheld for tax withholding purposes and the gross number of shares issued upon the exercise of stock appreciation rights or options through net exercise or tender of previously owned shares are not returned to the share reserve.

The 2015 Plan permits the grant of incentive stock options to employees and non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, cash-based awards and other stock-based awards to employees, directors, consultants and certain affiliated service providers. The 2015 Plan is administered by the Compensation Committee of the Board of Directors, which has the authority to determine award recipients and the terms and conditions of awards, subject to the provisions of the plan.

A summary of stock option activity for the nine months ended September 30, 2026 is presented below:

 Schedule of Stock Option Activity

As of September 30, 2026, the Company had outstanding stock options as follows:

 Schedule of Outstanding Stock Options

Based on a fair value of $0.50 per share on September 30, 2026, there were no exercisable but unexercised in-the-money common stock options on that date.

During the nine months ended September 30, 2026 and 2025, the Company had stock-based compensation expense of $35,183 and $210,684, respectively, related to the vesting of stock options granted to the Company’s employees and directors and included in our reported net loss. Vesting of options differs based on the terms of each option. In addition, during the nine months ended September 30, 2026 and 2025, options exercisable into 25,003 and 13,529 shares of common stock, respectively, were issued to employees in settlement of previously accrued bonuses of $34,854 and $46,183, respectively. During the nine months ended September 30, 2026, options exercisable into 6,301 shares of common stock expired.

The Company utilized the Black-Scholes option-pricing model. The assumptions used for the nine months ended September 30, 2026 are as follows:

  Schedule of Assumptions Using Black-Scholes Option Pricing Mode      

The expected volatility is a measure of the amount by which the Company stock price is expected to fluctuate during the expected term of options granted. The Company determines the expected volatility based upon the historical volatility of our common stock since listing on the Nasdaq Capital Market. The Company does not believe that the future volatility of its common stock over an option’s expected term is likely to differ significantly from the past. The risk-free interest rate used in the calculations is based on the implied yield available on U.S. Treasury issues with an equivalent term approximating the expected life of the options. The expected life of options granted was determined using the simplified method, under which the expected term is the average of the vesting period and the contractual term of the option. Stock-based compensation is a non-cash expense because the Company settles these obligations by issuing shares of its common stock from its authorized shares instead of settling such obligations with cash payments.