Annual report [Section 13 and 15(d), not S-K Item 405]

Share-based Compensation

v3.25.1
Share-based Compensation
12 Months Ended
Dec. 31, 2024
Share-Based Payment Arrangement [Abstract]  
Share-based Compensation

14. Share-based Compensation

 

The 2019 Plan provides for the granting of incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights (“SARs”), restricted stock units, performance awards, dividend equivalent rights and other awards, which may be granted singly, in combination, or in tandem, and which may be paid in cash, shares of common stock of the Company or a combination of cash and shares of common stock of the Company. The Company initially reserved a total of 57,143 shares of the Company’s common stock for awards under the 2019 Plan. Effective as of May 26, 2020 and May 3, 2021, respectively, the Board approved an increase of the number of authorized shares of common stock reserved under the 2019 Plan from 57,143 shares of common stock to 485,715 and from 485,715 shares of common stock to 571,429 shares of common stock, all of which may be delivered pursuant to incentive stock options.

 

On December 31, 2024, the Board approved an additional 780,000 shares of common stock to be reserved under the 2019 Plan, such that total of number of shares underlying the Plan is 1,651,429 of which 793,735 shares have already been awarded or exercised. The Company intends to submit this 780,000 increase under the 2019 for stockholder approval as part of the 2025 Proxy Statement. Subject to adjustments pursuant to the 2019 Plan, the maximum number of shares of common stock with respect to which stock options or SARs may be granted to an executive officer during any calendar year is 14,286 shares of common stock.

 

 

The following table contains information about the 2019 Plan as of December 31, 2024:

  

    Awards                 Awards  
    Reserved for     Awards     Awards     Available for  
    Issuance     Issued     Exercised     Grant  
2019 Plan(1)     1,651,429       793,735       149,464       857,594  
Awards issued in excess of 2019 Plan(2)     -       70,623       70,623       -  

 

(1) Includes incentive stock options and restricted stock units discussed below.
   
(2) Includes shares of restricted common stock granted outside of the 2019 Plan to our Chief Executive Officer, Adam Levy.

 

Incentive stock options

 

On September 17, 2024, the Company granted a contractor an option to purchase up to 70,000 shares of the Company’s common stock at a per share price of $2.65 under the Company’s 2019 Long-Term Incentive Plan. A portion of the award, 10,000 options are fully vested as of the date of the grant and the remaining 60,000 options are contingent upon certain sales based milestones being achieved.

 

On September 16, 2024, the Company granted a contractor an option to purchase up to 2,000 shares of the Company’s common stock at a per share exercise price of $2.00 under the Company’s 2019 Plan. This option award vests immediately.

 

On September 13, 2024, the Company granted options to purchase up to 100,000 shares of the Company’s common stock at a per share exercise price of $2.72 to members of the Board of Directors, all of which vests over a period of one year with 25% vested upon issuance.

 

On August 17, 2023, the Company granted options to purchase up to 90,000 shares of the Company’s common stock at a per share exercise price of $2.05 to members of the Board of Directors, all of which vests over a period of one year with 25% vested upon issuance.

 

On March 8, 2023, the Company granted a contractor an option to purchase up to 17,532 shares of the Company’s common stock at a per share exercise price of $2.00 under the Company’s 2019 Plan. This option award vests over a period of 12 months. The options expired unexercised.

 

The following table summarizes the Company’s incentive stock option activity and related information for the year ended December 31, 2024:

   

                Weighted  
          Weighted     Average  
          Average     Contractual  
    Number of     Exercise     Term in  
    Options     Price     Years  
Outstanding at January 1, 2023     524,937     $ 2.351416       8.38  
Granted     117,532     $ 2.06041       10.00  
Exercised     (3,295 )     1.75        
Forfeited                  
Cancelled     (69,854 )     1.965823        
Expired     (8,670 )     1.703222        
Outstanding at December 31, 2023     560,650     $ 2.350742       7.95  
Granted     172,000     $ 2.683140       10.00  
Exercised     (90,860 )     1.006035        
Forfeited                  
Cancelled     (39,107 )     1.006035        
Expired     (14,286 )     5.25        
Outstanding at December 31, 2024     588,397     $ 2.674538       7.81  
Exercisable at December 31, 2024     353,397     $ 2.168073       7.24  

 

 

As of December 31, 2024 and 2023, vested outstanding stock options had $1,151 thousand and $295 thousand of intrinsic value as the exercise price is greater than the estimated fair value of the underlying common stock, respectively. As of December 31, 2024 and 2023, there were $179 thousand and $0 of unrecognized share-based compensation related to unvested stock options, excluding options fully contingent upon certain sales-based milestones being achieved within 18 to 36 months of commercial release.

 

The Company recognizes compensation expense for stock option awards on a straight-line basis over the applicable service period of the award. The service period is generally the vesting period. The following assumptions were used to calculate share-based compensation expense for year ended December 31, 2024 and 2023:

   

    2024     2023  
Volatility     277.56-279.29 %     257.64-258.01 %
Risk-free interest rate     3.44-3.67 %     4.21-4.42 %
Dividend yield     0.0 %     0.0 %
Expected term     5.00 years       5 - 5.50 years  

 

The Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. Accordingly, the Company has elected to use the “simplified method” to estimate the expected term of its share-based awards. The simplified method computes the expected term as the sum of the award’s vesting term plus the original contractual term divided by two.

 

Based on the lack of historical data of volatility for the Company’s common stock, the Company based its estimate of expected volatility on a weighted-average of the historical volatility of comparable public companies that manufacture similar products and are similar in size, stage of life cycle, and financial leverage.

 

Restrictive stock awards

 

Effective as of January 1, 2024, the Company granted an aggregated restricted stock award of 22,222 shares of the Company’s common stock to Adam Levy for his service as our Chief Executive Officer pursuant to the terms of his Executive Employment Agreement dated December 31, 2023. The shares vest monthly from April 1, 2024 through December 31, 2024. Under ASC 718, Compensation—Stock Compensation, the Company has measured the value of the 22,222 shares granted based on the closing price of the Company’s stock at the grant date of the RSU Grant ($2.25 per share).

 

Effective as of January 3, 2023, the Company granted a restricted stock award of 37,037 shares of the Company’s common stock to Adam Levy for his service as our Chief Executive Officer pursuant to the terms of his Executive Employment Agreement dated December 30, 2022, all of which shares vested monthly from January 3, 2023 through December 31, 2023. Under ASC 718, the Company has measured the value of the 37,037 shares granted based on the closing price of the Company’s stock at the grant date of the RSU Grant ($1.35 per share).

  

    Number of    

Weighted

Average

Grant Date

 
    Units     Fair Value  
Outstanding at December 31, 2022     90,432     $ 1.43  
Granted     37,037       1.35  
Exercised and converted to common shares     (50,157 )     1.76522  
Forfeited     (12,750 )     1.82  
Outstanding at December 31, 2023     64,562       1.82  
Granted     57,972       2.46  
Exercised and converted to common shares     (62,910 )     2.08  
Forfeited     (3,750 )     2.30  
Outstanding at December 31, 2024     55,874     $ 2.16  
Exercisable at December 31, 2024     2,500     $ 1.82  

 

 

Compensation expense will be recognized ratable over the total vesting schedule. The Company will periodically adjust the cumulative compensation expense for forfeited awards. The Company recognizes the reversal of any previously recognized compensation expense on forfeited awards in the period the awards are forfeited. Stock based compensation of $367 thousand and $217 thousand has been recorded for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, there was $29 thousand unrecognized share-based compensation related to unvested RSUs, which the Company expects to recognize through December 2025.

 

Warrants

 

The following table shows a summary of common stock warrants for the years ended December 31, 2024 and 2023.

  

          Weighted     Weighted  
          Average     Average  
    Number of     Exercise     Contractual  
    Warrants     Price     Term in Years  
Outstanding at December 31, 2022     3,637,190     $ 5.16281       3.65  
Granted                  
Exercised     (109,720 )     0.55        
Forfeited                  
Cancelled     (84,566 )     0.89        
Expired                  
Outstanding at December 31, 2023     3,442,904       5.414793       2.87  
Warrants – 2021 IPO(1)     387,750       5.50       2.99  
Outstanding at January 1, 2024 (corrected)     3,830,654       5.423418       2.88  
Granted     947,792       4.18       5.00  
Exercised     (5,439 )     2.80        
Forfeited                  
Cancelled     (7,802 )     2.80        
Expired                  
Outstanding at December 31, 2024     4,765,205     $ 5.183120       2.42  
Exercisable at December 31, 2024     4,765,205     $ 5.183120       2.42  

 

  (1) The warrants outstanding have been corrected to reflect 387,750 additional warrants related to the December 27, 2021 unit offering not previously included in the prior year warrant schedule.

 

As of December 31, 2024, vested outstanding stock options had $300 thousand intrinsic value as the exercise price is greater than the estimated fair value of the underlying common stock. As of December 31, 2023, vested outstanding warrants had no intrinsic value as the exercise price is greater than the estimated fair value of the underlying common stock.