SOLESENCE, INC. Stock Compensation Disclosure

(10) Stock Options and Stock Grants

 

We have entered into stock option agreements with certain officers, employees and directors. The stock options granted prior to the adoption of the 2019 Equity Compensation Plan (the “2019 Plan”) on November 19, 2019 generally expired ten years from the date of grant. Future options to be granted under the 2025 Equity Compensation Plan (the “2025 Plan”) and 2019 Plan will expire seven years from the date of grant.

 

Employee Stock Options

 

We follow ASC Topic 718, Share-Based Payments, in which compensation expense is recognized only for share-based payments expected to vest.

 

		Years ended December 31,
		2025				2024
Share-based compensation expense		$	575			$	725
Remaining unrecognized compensation expense			692				1,057
Remaining weighted average-period, expense recognition (years)			2.0				2.4
Tax effect		$	335				77

 

We use the Black-Scholes option pricing model to determine the fair value of stock-based compensation. The Black-Scholes model requires us to make several assumptions, including the estimated length of time employees will retain their vested stock options before exercising them (“expected term”), the estimated volatility of our common stock price over the expected term, and estimated forfeitures. Expected price volatility is based on the daily market rate changes of our stock. The active shares granted prior to fiscal 2020 had a contractual life of 10 years as dictated by the 2010 Plan. The Black-Scholes model also requires a risk-free interest rate, which is based on the U.S. Treasury yield curve in effect at the time of the grant, and the dividend yield on our common stock, which is assumed to be zero since we do not pay dividends and have no current plans to do so in the future. Changes in these assumptions can materially affect the estimate of fair value of stock-based compensation and consequently, the related expense recognized on the statement of operations. We recognize stock-based compensation expense on a straight-line basis over the requisite service period.

 

The following table illustrates the various assumptions used to calculate the Black-Scholes option pricing model for options granted for all years presented:

 

		Years Ended December 31,
		2025				2024
Weighted-average risk-free interest rates:			4.0	%			4.3	%
Dividend yield:			0	%			0	%
Weighted-average expected life (years) of the option:			4				4
Weighted-average expected stock price volatility:			91	%			91	%
Weighted-average fair value of the options granted:		$	2.20			$	1.74

 

Additional disclosures for options granted for all years presented:

 

		Years Ended December 31,
		2025				2024
Vesting period (years) of shares granted in period			3				3
Contractual life (years) of shares granted in period			7				7
Estimated forfeitures			8	%			8	%

 

The following table summarizes the option activity for our employees and directors during the year ended December 31, 2025:

 

										Weighted
						Weighted				Average				Aggregate
						Average				Remaining				Intrinsic
		Shares				Exercise Price				Contractual				Value
Options		(Rounded)				per Share				Term (Years)				(000s)
Outstanding on January 1, 2025			3,221,739			$	1.47				4.4			$	3,961
Granted			106,000			$	3.06
Exercised			(510,766	)		$	0.64
Forfeited or expired			(64,500	)		$	2.03
Outstanding on December 31, 2025			2,752,473			$	1.67				3.8			$	1,464
Exercisable on December 31, 2025			2,206,050			$	1.62				3.3			$	1,279
Shares available for grant			2,956,900

 

 

The aggregate intrinsic value in the table above is based on our closing stock price of $1.66 on the last business day for the year ended December 31, 2025.

 

		Years ended   December 31,
		2025				2024
Shares exercised			510,766				455,995
Total intrinsic value		$	1,596			$	370
Cash received		$	323			$	239

 

Based on our election of the “with and without” approach, no realized tax benefits from stock options were recognized for the years ended December 31, 2025 and 2024.