NOTE 14. STOCK WARRANTS, STOCK OPTIONS AND RESTRICTED STOCK UNITS

The Company accounts for share-based compensation stock options and restricted stock units, and non-employee stock warrants under ASC 718, whereby costs are recorded based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable, utilizing the Black-Scholes pricing model for stock options and warrants, and the closing price of our common stock on the grant date for restricted stock units. Unless otherwise provided for, the Company covers equity instrument exercises by issuing new shares. 

Stock Warrants

During March, April and May 2021, the Company issued through the Offering convertible notes payable with warrants, (see Note 10), to purchase up to 334,167 shares of our common stock at an exercise price of $9 per share. The warrants expire two years after the date of issuance.

On September 28, 2021 and March 30, 2022 the Company issued through the sale of the Debenture Original Warrants and New Warrants, (see Note 9), to purchase up to 406,504 and 101,626, respectively, shares of our common stock at an exercise price of $6 per share. The warrants expire seven years after the date of issuance.

The following table summarizes the changes in the Company’s outstanding warrants during the three-month period ended March 31, 2022 and 2021, and as of March 31, 2022 and 2021:

Share-Based Compensation

On October 24, 2019, the Company’s 2019 Equity Incentive Plan (the “Plan”) went effective authorizing 1,282,823 shares of Company common stock for issuance as stock options and restricted stock units (“RSUs”) to employees, directors or consultants. The Plan was approved by the Company’s Board of Directors and the holders of a majority of the Company’s voting stock on September 9, 2019. In January 2022, the stockholders ratified a further authorization of shares of common stock for a total of 1,733,333 shares subject to the Plan.

The Company generally recognizes share-based compensation expense on the grant date and over the period of vesting or period that services will be provided.

Stock Options

As of March 31, 2022 and December 31, 2021, the Company has granted stock options to acquire 1,106,587 and 1,036,588 shares of common stock under the plan, respectively. As of March 31, 2022, the plan has 679,204 vested shares and 427,383 non-vested shares. As of December 31, 2021, the plan had 618,841 vested shares and 417,747 non-vested shares. The stock options are held by our officers, directors, employees, and certain key consultants. 

In applying the Black-Scholes options pricing model, assumptions used to compute the fair value of the stock options granted during the three-month periods ended March 31, 2022 and 2021 were as follows:

The following table summarizes the changes in the Company’s outstanding stock options during the three-month periods ended March 31, 2022 and 2021:

Restricted Stock Units

The Plan provides for the grant of RSUs.  RSUs are settled in shares of the Company’s common stock as the RSUs become vested. In January and February 2022, the Company granted 16,667 service based RSUs to an executive officer and 25,000 service based RSUs to a director, respectively. All RSUs granted in 2022 vest the earlier of the expiration of any lock-up period that includes the securities of the Company owned by the Plan participant after the up list of the Company to a national exchange or January 1, 2023.  On January 12, 2022, 16,667 shares of the Company’s common stock were issued for the RSUs vested during 2021.

The following table summarizes RSU activity under the Plan for the three-month periods ended March 31, 2022 and 2021:

In total for the three months ended March 31, 2022 and 2021, the Company recorded in general and administrative expense $442,784 and $60,531, respectively, of share-based compensation expense related to restricted stock units. As of March 31, 2022, total estimated compensation costs of RSUs granted and outstanding but not yet vested was $774,765 which is expected to be recognized over the weighted average period of 9 months. 

Executive Officers Stock Options and RSUs

The Company has 311,436 and 823,482 outstanding executive officers stock options exercisable at $0.7902 to $10.14 and $0.7902 to $10.14 per share as of March 31, 2022 and December 31, 2021, respectively.  The Company has 175,252 and 61,919 unvested RSUs granted to executive officers as of March 31, 2022 and December 31, 2021, respectively.