Share-based Compensation

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement [Abstract]

Share-based Compensation

12. 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 March 23, 2023, the Board approved an additional 300,000 shares of common stock to be reserved under the 2019 Plan, such that total of number of shares underlying the Plan is 871,429 of which 609,687 shares have already been awarded or exercised. 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, 2023:

	Awards						Awards
	Reserved for		Awards		Awards		Available for
	Issuance		Issued		Exercised		Grant
2019 Plan(1)		871,429		649,833		17,916		221,596
Awards issued in excess of 2019 Plan(2)		-		48,401		48,401		-

(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 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.

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 October 1, 2022, the Company appointed Dr. Neil Chesen to the Company’s Scientific Advisory Board and in consideration for his appointment to the board, the Company granted Dr. Chesen an option to purchase up to 65,000 shares of common stock at a per share exercise price of $2.00 under the Company’s 2019 Long-Term Incentive Plan. A portion of the award, 15,000 options, fully vested as of the date of grant and the remaining 50,000 options are contingent upon certain sales based milestones being achieved. The options expire on December 31, 2023 if the milestones are not achieved prior to that date. Also on October 1, 2022, the Company issued a second option grant to Dr. Chesen, to purchase up to 25,000 shares of common stock at a per share exercise price of $2.00 under the Company’s 2019 Long-Term Incentive Plan and are fully contingent upon certain sales based milestones being achieved with 18 months of commercial release. Also on October 1, 2022, the Company issued a third option grant to Dr. Chesen to purchase up to 37,500 shares of common stock at a per share exercise price of $5.50 under the Company’s 2019 Long-Term Incentive Plan and are fully contingent upon certain sales based milestones being achieved within 36 months of commercial release. As of December 31, 2022 the new product has not launched. The product launched in August 2023.

On October 1, 2022, the Company granted Dr. Leonard Nelson an option to purchase up to 30,000 shares of the Company’s common stock at a per share price of $2.00 under the Company’s 2019 Long-Term Incentive Plan. A portion of the award, 5,000 options, fully vested as of the date of the grant and the remaining 25,000 options are contingent upon certain sales based milestones being achieved. The options expire within 18 months of commercial launch of a new product if the milestones are not achieved prior to that date or 10 years from the grant date, whichever comes first. The product launched in August 2023.

On October 1, 2022, the Company granted Dr. Leonard Nelson an option to purchase up to 37,500 shares of the Company’s common stock at a per share price of $5.50 under the Company’s 2019 Long-Term Incentive Plan. The options are contingent upon certain sales based milestones being achieved. The options expire within 36 months of commercial launch of a new product if the milestones are not achieved prior to that date or 10 years from the grant date, whichever comes first. The product launched in August 2023.

The following table summarizes the Company’s incentive stock option activity and related information for the years ended December 31, 2023 and 2022.

						Weighted
				Weighted		Average
				Average		Contractual
	Number of			Exercise		Term in
	Options			Price		Years
Outstanding at January 1, 2022		434,939		$	1.678955		8.56
Granted		195,000			3.3461538		10.00
Exercised		—			—		—
Forfeited		—			—		—
Cancelled		(100,001	)		1.40000		—
Expired		(5,001	)		1.40000		—
Outstanding at December 31, 2022		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
Exercisable at December 31, 2023		398,150		$	1.829884		7.44

As of December 31, 2023 and 2022, vested outstanding stock options had $295 thousand and $124 thousand intrinsic value as the exercise price is greater than the estimated fair value of the underlying common stock, respectively. As of December 31, 2023, there was no 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, 2023 and 2022:

	2023			2022
Volatility		257.64-258.01	%		277.84	%
Risk-free interest rate		4.21-4.42	%		4.06	%
Dividend yield		0.0	%		0.0	%
Expected term		5 - 5.50 years			5.0 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 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).

Effective as of August 1, 2022, the Company granted a restricted stock award of 84,750 shares of the Company’s common stock to certain officers and employees, all of which shares vest in four equal installments on each of January 1, 2023, January 1, 2024, January 1, 2025 and January 1, 2026. Under ASC 718, the Company has measured the value of the 84,750 shares granted based on a closing price of the closing price of the Company’s stock at the grant date of the RSU Grant ($1.82 per share).

Effective as of January 1, 2022, the Company granted a restricted stock award of 11,364 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 November 4, 2021, all of which shares vested monthly from January 1, 2022 through December 31, 2022. Under ASC 718, the Company has measured the value of the 11,364 shares granted based on the closing price of the Company’s stock at the grant date of the RSU Grant ($4.40 per share).

				Average
	Number of			Grant Date
	Units			Fair Value
Outstanding at December 31, 2021		—		$	—
Granted		96,114			1.61
Exercised and converted to common shares		(5,682	)		4.40
Forfeited		—			—
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
Exercisable at December 31, 2023		13,750		$	1.82

Compensation expense will be recognized ratably over the total vesting schedule. The Company will periodically adjust the cumulative compensation expense for forfeited awards. As of December 31, 2023, there was $68 thousand unrecognized share-based compensation related to unvested RSUs, which the Company expects to recognize through December 2026.

Stock based compensation and restricted stock vesting of $217 thousand and $298 thousand has been recorded for the year ended December 31, 2023 and 2022, respectively.

Warrants

The following table shows a summary of common stock warrants for the years ended December 31, 2023 and 2022.

				Weighted		Weighted
				Average		Average
	Number of			Exercise		Contractual
	Warrants			Price		Term in Years
Outstanding at December 31, 2021		3,637,190		$	5.16281		4.63
Granted		—		$	—		—
Exercised		—			—		—
Forfeited		—			—		—
Cancelled		—			—		—
Expired		—			—		—
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
Exercisable at December 31, 2023		3,442,904		$	5.414793		2.87

As of December 31, 2023 and 2022, vested outstanding warrants had $0 and $114 thousand, respectively, intrinsic value as the exercise price is greater than the estimated fair value of the underlying common stock.