HeartCore Enterprises, Inc. Stock Compensation Disclosure
NOTE 16 – STOCK-BASED COMPENSATION
Options
On August 6, 2021, the Board of Directors and shareholders of the Company approved a 2021 Equity Incentive Plan (“2021 Plan”), under which 2,400,000 shares of common shares are authorized for issuance.
On August 2, 2022, the Company awarded options to purchase 2,000 shares of common shares pursuant to the 2021 Plan at an exercise price of $2.94 per share to an employee of the Company. The options vest on each annual anniversary of the date of issuance, in an amount equal to 25% of the applicable shares of common shares, with the expiration date on August 2, 2032.
On August 9, 2022, the Company awarded options to purchase 14,500 shares of common shares at an exercise price of $2.48 per share to three prior employees of the Company. The options are fully vested and exercisable on the grant date, with the expiration date on August 9, 2026.
On February 3, 2023, the Company awarded options to purchase 100,000 shares of common shares pursuant to the 2021 Plan at an exercise price of $1.17 per share to an employee of the Company. The options vest 50% on the grant date and February 1, 2024, respectively, with the expiration date on February 3, 2033.
On August 25, 2023, the Company awarded options to purchase 2,000 shares of common shares pursuant to the 2021 Plan at an exercise price of $1.10 per share to an employee of the Company. The options vest on each annual anniversary of the date of issuance, in an amount equal to 25% of the applicable shares of common shares, with the expiration date on August 25, 2033.
On August 1, 2023, the Board of Directors of the Company approved a 2023 Equity Incentive Plan (“2023 Plan”), under which 2,000,000 shares of common shares are authorized for issuance.
The following table summarizes the stock options activity and related information for the years ended December 31, 2024 and 2023:
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Term (Years) | Intrinsic Value | |||||||||||||
| As of January 1, 2023 | 1,466,500 | $ | 2.50 | 8.94 | $ | |||||||||||
| Granted | 102,000 | 1.17 | 9.11 | - | ||||||||||||
| Exercised | - | - | ||||||||||||||
| Forfeited | (21,500 | ) | 2.54 | - | - | |||||||||||
| As of December 31, 2023 | 1,547,000 | $ | 2.41 | 8.01 | $ | |||||||||||
| Granted | - | - | ||||||||||||||
| Exercised | - | - | ||||||||||||||
| Forfeited | (40,500 | ) | 2.43 | - | - | |||||||||||
| As of December 31, 2024 | 1,506,500 | $ | 2.41 | 7.01 | $ | 64,500 | ||||||||||
| Vested and exercisable as of December 31, 2024 | 1,158,500 | $ | 2.38 | 7.01 | $ | 64,500 | ||||||||||
The Company calculated the fair value of options granted in the year ended December 31, 2023 using the Black-Scholes model. The following table summarizes the inputs to the model used to estimate the fair value of the options granted for the year ended December 31, 2023:
| For the Year Ended December 31, 2023 | ||||
| Expected volatility | 54.63% – 178.13 | % | ||
| Risk-free interest rate | 3.67% – 4.37 | % | ||
| Dividend yield | 0.00 | % | ||
| Exercise term (in years) | 5.25 – 6.25 | |||
The Company recognized stock-based compensation related to options of $247,859 and $612,937 during the years ended December 31, 2024 and 2023, respectively. The outstanding unamortized stock-based compensation related to options was $121,550 (which will be recognized through December 2025) as of December 31, 2024.
Restricted Stock Units (“RSUs”)
On February 9, 2022, the Company entered into executive employment agreements with five executives and granted 85,820 RSUs pursuant to the 2021 Plan. The RSUs vest on each annual anniversary of the date of the employment agreement, in an amount equal to 25% of the applicable shares of common shares. The fair value of the RSUs at grant date is $424,809.
On March 22, 2023, the Company entered into agreements with employees and service providers of Sigmaways and granted 671,350 RSUs pursuant to the 2021 Plan. The RSUs are fully vested upon issuance. The fair value of the RSUs at grant date is $691,491.
On October 1, 2024, the Company granted 69,653 RSUs pursuant to the 2023 Plan to four executives of the Company. The RSUs are fully vested upon issuance. The fair value of the RSUs at grant date is $52,944.
The following table summarizes the RSUs activity for the years ended December 31, 2024 and 2023:
| Number of RSUs | Weighted Average Value Per Share | |||||||
| Unvested as of January 1, 2023 | 85,820 | $ | 4.95 | |||||
| Granted | 671,350 | 1.03 | ||||||
| Vested | (692,804 | ) | 1.15 | |||||
| Forfeited | ||||||||
| Unvested as of December 31, 2023 | 64,366 | $ | 4.95 | |||||
| Granted | 69,653 | 0.76 | ||||||
| Vested | (91,107 | ) | 1.75 | |||||
| Forfeited | ||||||||
| Unvested as of December 31, 2024 | 42,912 | $ | 4.95 | |||||
The Company recognized stock-based compensation related to RSUs of $120,885 and $817,576 during the years ended December 31, 2024 and 2023, respectively. The outstanding unamortized stock-based compensation related to RSUs was $33,169 (which will be recognized through February 2026) as of December 31, 2024.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.