Options and warrants

12 Months Ended

Dec. 31, 2024

Note 9 – Options and warrants

Options

All stock options have an exercise price equal to the fair market value of the common stock on the date of grant. The fair value of each option award is estimated using a Black-Scholes-Merton option valuation model. The Company has not paid any cash dividends on its common stock and does not anticipate paying any cash dividends in the foreseeable future. Consequently, the Company uses an expected dividend yield of zero in the Black-Scholes-Merton option valuation model. Volatility is an estimate based on the calculated historical volatility of similar entities in industry, in size and in financial leverage, whose share prices are publicly available. The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company has no historical experience with which to establish a basis for determining an expected life of these awards. Therefore, the Company only gave consideration to the contractual terms and did not consider the vesting schedules, exercise patterns and pre-vesting and post-vesting forfeitures significant to the expected life of the option award. The Company bases the risk-free interest rate used in the Black-Scholes-Merton option valuation model on the implied yield currently available on U.S. Treasury issues with an equivalent remaining term equal to the expected life of the award.

On May 3, 2023, the Company issued Andrew Berman, a Director of the Company, an option to purchase 350,000 shares of the Company’s common stock. The option is exercisable at a price of $0.21 per share and expires on September 30, 2027. Options to purchase 50% of the shares can be exercised immediately. Options to purchase 25% of the shares can be exercised after June 30, 2023. Options to purchase 25% of the shares can be exercised after March 30, 2024. At that time, the Company also issued Mr. Berman an option to purchase an additional 400,000 shares of the Company’s common stock. The option is exercisable at a price of $.21 per share. The option to purchase these 400,000 shares will not be exercisable unless and until the Company (i) sells all or substantially all of its assets or (ii) the Company mergers with another entity and the Company is not the surviving entity in the merger. Notwithstanding the above, the option will not be issued if condition (i) or (ii) are not met by September 29, 2027, in which case the option will expire on September 30, 2027.

The following is a summary of the Company’s stock option activity for the year ended December 31, 2024:

Summary of Stock Option Activity

	Number Of Options			Weighted-Average Exercise Price

Outstanding at December 31, 2023		3,332,000		$	0.21
Granted⁽¹⁾		-		$	-
Expired		-		$	-
Cancelled		(35,000	)	$	0.21
Outstanding at December 31, 2024		3,297,000		$	0.21
Options exercisable at December 31, 2024		2,560,250		$	0.21

The following tables summarize information about stock options outstanding and exercisable at December 31, 2024:

OPTIONS OUTSTANDING AND EXERCISABLE AT DECEMBER 31, 2024

Range of
Exercise Prices

Number of

Options

Outstanding

Weighted-

Average

Remaining

Contractual

Life in Years

Weighted-

Average

Exercise
Price

Number

Exercisable

Weighted-

Average

Exercise
Price

0.21

3,297,000

2.75

0.21

2,560,250

0.21

Total stock-based compensation expense in connection with options and modified awards recognized in the consolidated statement of operations for years ended December 31, 2024 and December 31, 2023 was $163,063 and $50,180, respectively.

The Company used the Black-Scholes option pricing model to estimate the fair value of the options at the grant date using the following ranges of assumptions:

The expected volatility was estimated by using the historical volatility of the Company. The expected life in years represents the period of time that options granted are expected to be outstanding. In accordance with Staff Accounting Bulletin (“SAB”) Topic 14, the Company uses the simplified method for estimating the expected term. The Company believes the use of the simplified method is appropriate due to the employee stock options qualifying as “plain-vanilla” options under the criteria established by SAB Topic 14. The risk-free rate was based on the United States bond yield rate at the time of grant of the award. Expected annual rate of dividends is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

Blue Line Protection Group, Inc. 10-K