12. Stock-Based Compensation

Equity Incentive Plans – The Company’s 2013 Equity Compensation Plan (the “2013 Plan”) was adopted for the purpose of providing equity incentives to employees, officers, directors and consultants including options, restricted stock, restricted stock units, stock appreciation rights, other equity awards, annual incentive awards and dividend equivalents. Through a series of amendments to the 2013 Plan, the total number of authorized shares available for issuance of common stock under the Plan was 750,000 shares.

On April 11, 2023, the Board of Directors adopted a new equity incentive plan, the Professional Diversity Network, Inc. 2023 Equity Compensation Plan (the “2023 Equity Compensation Plan”). The 2023 Equity Compensation Plan was approved by the Company’s stockholders on June 15, 2023. The 2023 Equity Compensation Plan supersedes and replaces the 2013 Plan, and no new awards will be granted under the 2013 Plan. Any awards outstanding under the 2013 Plan remain subject to and will be paid under the 2013 Plan. The 2023 Equity Compensation Plan reserves 750,000 shares of common stock for issuance of awards to directors, officers, employees and qualifying consultants of the Company and its affiliates.

Stock Options

The fair value of options is estimated on the date of grant using the Black-Scholes option pricing model. The valuation determined by the Black-Scholes pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The risk-free rate is based on the U.S. Treasury rate for the expected life at the time of grant, volatility is based on the average long-term implied volatilities of peer companies, the expected life is based on the estimated average of the life of options using the simplified method, and forfeitures are estimated on the date of grant based on certain historical data. The Company utilizes the simplified method to determine the expected life of its options due to insufficient exercise activity during recent years as a basis from which to estimate future exercise patterns. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts.

Forfeitures are required to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The following table summarizes the Company’s stock option activity for the nine months ended September 30, 2023 and 2022:

 Schedule of Stock Option Activity

The Company recorded non-cash stock-based compensation expense of approximately $8,000 and $8,000 as a component of general and administrative expenses in the accompanying consolidated statements of operations for the nine months ended September 30, 2023 and 2022, respectively, pertaining to granting of stock option awards.

Total unrecognized stock-based compensation expense related to unvested stock options at September 30, 2023 was approximately $7,700 and is expected to be recognized through the second quarter of 2024.

Restricted Stock Units

As of September 30, 2023 and 2022, the following is a summary of restricted stock unit activity:

 Schedule of Restricted Stock Unit Activity

During the period ended June 30, 2023, the Company granted 30,490 total restricted stock units for a value of $125,000 to the members of the Board of Directors per their compensation agreements. The shares will vest one year from the grant date of June 15, 2023.

During the period ended September 30, 2023, the Company granted 86,844 total restricted stock to certain officers and managers with immediate vesting as of July 18, 2023. The aggregate grant date fair value of the combined awards amounted to approximately $141,000.

In July 2023, the Company granted 120,000 restricted stock units to Mr. He, Chief Executive Officer of the Company, as part of his employment agreement entered into July 18, 2023. The shares will vest as follows: 1/3 immediately ‎upon grant, 1/3 on the first anniversary of the employment agreement, and the final 1/3 on the ‎second anniversary of the employment agreement; provided, however, that Mr. He must remain ‎continuously employed by the Company and/or its affiliates through the applicable ‎vesting date. The aggregate grant date fair value of the combined awards amounted to approximately $361,000.

The Company recorded non-cash stock-based compensation expense of $262,248 and $439,655 as a component of general and administrative expenses in the accompanying consolidated statements of operations for the nine months ended September 30, 2023 and 2022, respectively, pertaining to granting of restricted stock awards.

Total unrecognized stock-based compensation expense related to 110,488 unvested restricted stock units at September 30, 2023 was approximately $426,000 and is expected to be fully recognized by the third quarter of 2025.