EQUITY INCENTIVE PLAN

12 Months Ended

Dec. 31, 2023

EQUITY INCENTIVE PLAN [Abstract]

EQUITY INCENTIVE PLAN

12. EQUITY INCENTIVE PLAN

The Company currently issues stock awards under its 2017 Stock Option and Incentive Plan, as amended (the "2017 Plan") which will expire on June 5, 2027.  The shares authorized for issuance under the 2017 Plan were 249,693 at December 31, 2023 of which 14,392 were available for future grant. The shares authorized under the 2017 Plan are subject to annual increases on January 1 by 5% of the number of shares of common stock issued and outstanding on the immediately preceding December 31, or such lessor number of shares determined by the Company’s Board of Directors or Compensation Committee. During the year ended December 31, 2023, the shares authorized for issuance increased by 57,051 shares.

The Plan is administered by the Compensation Committee of the Board of Directors (the “Committee”), which has the authority to set the number, exercise price, term and vesting provisions of the awards granted under the Plan, subject to the terms thereof. Either incentive or non-qualified stock options may be granted to employees of the Company, but only non-qualified stock options may be granted to non-employee directors and advisors. However, in either case, the Plan requires that stock options must be granted at exercise prices not less than the fair market value of the common stock on the date of the grant. Options issued under the plan vest over periods as determined by the Committee and expire 10 years after the date the option was granted.

Stock Options.

The Company accounts for all stock-based compensation payments to employees and directors, including grants of employee stock options, at fair value at the date of grant and expenses the benefit in operating expense in the consolidated statements of operations over the service period of the awards. The Company records the expense for stock-based compensation awards subject to performance-based milestone vesting over the remaining service period when management determines that achievement of the milestone is probable based on the expected satisfaction of the performance conditions as of the reporting date. The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option pricing model, which requires various assumptions including estimating stock price volatility, expected life of the stock option, risk free interest rate and estimated forfeiture rate.

During the year ended December 31, 2023, the Company granted stock options to purchase up to 58,780 shares of common stock at a weighted average exercise price of $12.12. These awards have vesting periods of up to four years and had a weighted average grant date fair value of $11.60. The fair value calculation of options granted during 2023 used the follow assumptions: risk free interest rates of 3.63% to 4.05%, based on the U.S. Treasury yield in effect at the time of grant; expected life of six years; and volatility of 142% to 162% based on historical volatility of the Company’s common stock over a time that is consistent with the expected life of the option.

The following table summarizes stock option activity under our plans during the year ended December 31, 2023:

	Number of	Weighted-Average
	Options	Exercise Price
Outstanding at January 1, 2023	184,067	$	56.75
Granted	58,780		12.12
Forfeited	(10,103)		24.02
Outstanding at December 31, 2023	232,744	$	46.56
Exercisable at December 31, 2023	151,479	$	56.06

As of December 31, 2023, there were 213,891 options that were vested or expected to vest with an aggregate intrinsic value of zero and a remaining weighted average contractual life of 7.5 years.

During the year ended December 31, 2022, there were 55,700 options granted with a weighted average exercise price of $30.20 and 3,397 options forfeited with a weighted average exercise price of $43.60.

Restricted Stock Awards.

Restricted stock awards are subject to vesting restrictions. If a grantee’s service with the Company is terminated prior to vesting of the restricted stock, all unvested shares shall be forfeited and returned to the Company. Upon vesting, the restricted stock award shall no longer be deemed restricted.

During the year ended December 31, 2023, the Company granted 2,492 restricted stock awards to directors of the Company. The awards vested immediately and had a weighted average grant date fair value of $5.90. As of December 31, 2023, there were 2,492 and zero restricted stock awards that were vested and unvested, respectively.

There were no restricted stock awards granted during the year ended December 31, 2022.

Stock Compensation.

During the years ended December 31, 2023 and 2022, we recorded compensation expense for all stock awards of $1.6 million and $3.8 million, respectively, within operating expense in the accompanying statements of operations. As of December 31, 2023, the unrecognized compensation expense related to unvested stock awards was $2.1 million, which is expected to be recognized over a weighted-average period of 1.9 years.