11. Stockholder’s Equity

On April 7, 2021, the Company filed a Certificate of Incorporation with the Secretary of State of the State of Delaware (see Note 1) which authorizes the Company to issue 50,000,000 shares of common stock and 10,000,000 shares of preferred stock, each with a par value of $0.001.

On May 13, 2021, the Company effected a forty-thousand (40,000)-for-one stock split to the shareholder of record as of May 13, 2021. The stock split was in the form of a common stock dividend of 3,999,900 new shares and all share and per share information has been retroactively adjusted to reflect the stock split.

On July 23, 2021, the Company, consummated its initial public offering (the “IPO”) of 3,000,000 shares of its common stock (“Shares”) at a public offering price of $6.00 per Share, generating gross proceeds of $18,000,000, which netted to the Company $15,849,037 after offering expenses. The Company had granted the underwriters a 45-day option to purchase up to 450,500 additional Shares to cover over-allotment., which option expired unexercised.

Common Stock Warrants

As of September 30, 2021, the Company has outstanding warrants to purchase 3,000,000 shares of common stock issuable at a weighted-average exercise price of $7.50 per share that were issued to the representative of the underwriters in connection with the IPO. There was no warrant activity during the quarter ended September 30, 2021 other than the warrant issuance.

Equity Compensation Plans

The Company maintains an equity compensation plan under which it may award employees, directors and consultants incentive and non-qualified stock options, restricted stock, stock appreciation rights and other stock based awards with terms established by the Compensation Committee of the Board of Directors which has been appointed by the Board of Directors to administer the plans. As of September 30, 2021, there were $407,500 shares remaining available for grant under these plans.

Accounting for Stock -Based Compensation

Stock Compensation Expense - For the three and nine months ended September 30, 2021, the Company recorded $86,571 and $86,571 of stock-based compensation expense, respectively. For the three and nine months ended September 30, 2020, the Company did not issue any stock-based compensation expense.

Stock Options. Under the Company’s 2021 Stock Incentive Plan the Company has issued stock options. A stock option grant gives the holder the right, but not the obligation to purchase a certain number of shares at a predetermined price for a specific period of time. The Company typically issues options that vest pro rata on a monthly basis over 36 months. Under the terms of the Plan, the contractual life of the option grants may not exceed ten years. During the nine months ended September 30, 2021 and 2020, the Company issued options that expire ten years from the date of grant. In July 2021, the Company granted under its 2021 Stock Incentive Plan stock options to purchase 272,000 shares of the Company’s common stock to Joseph Visconti, stock options to purchase 136,000 shares of the Company’s common stock to Preston Yarborough, stock options to purchase 68,000 shares of the Company’s common stock to Donna Barnett, stock options to purchase 5,500 shares of the Company’s common stock to Pete Melvin, stock options to purchase 5,500 shares of the Company’s common stock to Neil Ross and stock options to purchase 5,500 shares of the Company’s common stock to Steven A. Shallcross. The stock option awards to Mr. Visconti, Mr. Yarborough and Ms. Barnett vest pro rata on a monthly basis over 36 months, subject to the officer’s continuous service to the Company on each applicable vesting date. The stock option awards to Mr. Melvin, Mr. Ross and Mr. Shallcross vest pro rata on a monthly basis over 12 months, subject to the director’s continuous service to the Company on each applicable vesting date. The options are exercisable for a period of ten 10 years from the date of grant and have an exercise price of $5.80 per share.

In August 2021, the Company granted under its 2021 Stock Incentive Plan stock options to purchase 100,000 shares of the Company’s common stock to its employees. The stock option awards to the employees vest on the one (1) year anniversary of the grant date. The options are exercisable for a period of ten (10) years from the date of grant and have an exercise price of $4.10 per share.

During the nine months ended September 30, 2021, $86,571 was expensed, and as of September 30, 2021, $1,303,142 remains unamortized and is expected to vest over 34 months. The intrinsic value of the 592,500 options outstanding as of September 30, 2021 is $0.

The Company utilizes the Black-Scholes model to determine fair value of stock option awards on the date pf grant. The Company utilized the following assumptions for option grants during the three and nine months ended September 30, 2021:

The expected volatility of the option is determined using historical volatilities based on historical stock price of comparable boat manufacturing companies. The Company estimated the expected life of the options granted based upon historical weighted average of comparable boat manufacturing companies. The risk-free interest rate is determined using the U.S. Department of the Treasury yield curve rates with a remaining term equal to the expected life of the option. The Company has never paid a dividend, and as such the dividend yield is 0.0%