INVO Fertility, Inc. Stock Compensation Disclosure

Note 13 – Equity-Based Compensation

 

Equity Incentive Plans

 

In October 2019, the Company adopted the 2019 Plan. Under the 2019 Plan, the Company’s board of directors is authorized to grant stock options to purchase common stock, restricted stock units, and restricted shares of common stock to its employees, directors, and consultants. The 2019 Plan initially provided for the issuance of 25,000 shares. A provision in the 2019 Plan provides for an automatic annual increase equal to 6% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year. In January 2024, the number of available shares increased by 12,463 shares, bringing the total shares available under the 2019 Plan to 25,921.

 

Options granted under the 2019 Plan generally have a life of 3 to 10 years and exercise prices equal to or greater than the fair market value of the common stock as determined by the Company’s board of directors. Vesting for employees typically occurs over a three-year period. For the year ending December 31, 2024, the Company incurred $342,728 in expense related to the vesting of options.

 

 

The following table sets forth the activity of the options to purchase common stock under the 2019 Plan. 

Schedule of Stock Options Activity  

		Number of Shares				Weighted Average Exercise Price				Aggregate Intrinsic Value
Outstanding as of December 31, 2023			8,929			$	502.73			$	-
Granted			-				-				-
Exercised			-				-				-
Canceled			(737	)			380.60				-
Balance as of December 31, 2024			8,192				422.05				-
Exercisable as of December 31, 2024			7,982			$	594.97			$	-

 

The fair value of each option granted is estimated as of the grant date using the Black-Scholes option pricing model with the following assumptions:

 

Schedule of Share-Based Payment Award, Stock Options, Valuation Assumptions

			Years ended December 31,
			2024				2023
Risk-free interest rate range			3.95	%			3.60 to 3.69	%
Expected life of option-years			5.50				5.00 to 5.63
Expected stock price volatility			150	%			106.6 to 114.9	%
Expected dividend yield			-	%			-	%

 

The risk-free interest rate is based on U.S. Treasury interest rates, the terms of which are consistent with the expected life of the stock options. Expected volatility is based upon the average historical volatility of the Company’s common stock over the period commensurate with the expected term of the related instrument. The expected life and estimated post-employment termination behavior is based upon historical experience of homogeneous groups, executives and non-executives, within the Company. The Company does not currently pay dividends on its common stock, nor does it expect to do so in the foreseeable future.

Schedule of Share Based Payments Arrangements Options Exercised and Options Vested

		Total Intrinsic Value of Options Exercised				Total Fair Value of Options Vested
Year ended December 31, 2023		$	-			$	1,049,109
Year ended December 31, 2024		$	-			$	278,406

 

The Company estimates the fair value of options at the grant date using the Black-Scholes model. For all stock options granted through December 31, 2024, the weighted average remaining service period is 1.01 years.

 

Common Stock Options Issued for Services

 

On January 13, 2023, the Company granted options to purchase 1,615 shares of the Company’s common stock, having an exercise price of $10.36 per share, exercisable over a 10- year term, to existing employees. The options vested immediately on the date of grant. The aggregate estimated value using the plain vanilla Black-Scholes Pricing Model, based on a volatility rate of 114% and a call option value of $0.423, and an expected term of 5.0 years, was $13,648. The options were expensed as stock-based compensation expense during the year ended December 31, 2023.

 

On January 31, 2023, the Company granted options to purchase 2,663 shares of the Company’s common stock, having an exercise price of $11.50 per share, exercisable over a 10- year term, to existing employees. The options vested immediately on the date of grant. The aggregate estimated value using the plain vanilla Black-Scholes Pricing Model, based on a volatility rate of 114% and a call option value of $0.575, and an expected term of 5.0 years, was $30,591. The options were expensed as stock-based compensation expense during the year ended December 31, 2023.

 

On March 18, 2023, the Company granted options to purchase 51,800 shares of the Company’s common stock, having an exercise price of $7.36 per share, exercisable over a 10- year term, to existing employees and board members. The options vest quarterly over one to three years from the date of grant. The aggregate estimated value using the plain vanilla Black-Scholes Pricing Model, based on a volatility rate of 113% and a call option value of $0.308, and an expected term of 5.63 years, was $272,992. The options are being expensed over the vesting period, resulting in $170,742 and $59,949 of stock-based compensation expense during the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, a total of $42,301 of unamortized expenses are expected to be expensed over the vesting period.

 

Restricted Stock and Restricted Stock Units

 

During the year ended December 31, 2024, the Company did not grant any restricted stock units and shares of restricted stock to any employees, directors, and consultants under the 2019 Plan. Restricted stock issued to employees, directors, and consultants generally vest either at grant or vest over a period of one year from the date of grant.

 

The following table summarizes the Company’s restricted stock awards activity under the 2019 Plan during the year ended December 31, 2024:

 

Schedule of Aggregate Restricted Stock Awards and Restricted Stock Unit Activity

		Number of Unvested Shares				Weighted Average Grant Date Fair Value				Aggregate Value of Shares
Balance as of December 31, 2023			2			$	18.42			$	5,525
Granted			-				-				-
Vested			(2	)			18.42				5,525
Forfeitures			-				-				-
Balance as of December 31, 2024			-			$	-			$	-

 

 

NAYA Therapeutics Acquisition

 

As part of the acquistion of NTI, NTI stock options and RSU’s were to be exchanged for 30,465 options and 142,124 RSU’s of the Company’s stock. However, such options may not be exercised for shares of the Company’s common stock and such restricted stock units may not be settled for shares of the Company’s common stock unless and until the Company’s stockholders approve the issuance of common stock upon exercise of such options and settlement of such restricted stock units. As of the date of this filing, stockholder approval had not been received.