SHARE-BASED COMPENSATION

12 Months Ended

Dec. 31, 2024

Share-Based Payment Arrangement [Abstract]

SHARE-BASED COMPENSATION

13. SHARE-BASED COMPENSATION

On March 31, 2017, the Company adopted, and the stockholders approved, the 2017 Stock Incentive Plan (the “Plan”) authorizing 2,000,000 shares of Common Stock for issuance as awards to employees, directors or consultants. In May 2019, the stockholders authorized an increase in the Plan authorizing an additional 2,100,000 shares of Common Stock, in June 2020 authorized an additional 1,900,000 shares of Common Stock, in June 2021 authorized an additional 1,500,000 shares of Common Stock, in June 2022 authorized an additional 1,500,000 shares of Common Stock, in December 2024 authorized an additional 7,500,000 shares of Common Stock for a total of 16,500,000 shares subject to the Plan. At December 31, 2024, there were 7,585,545 shares of Common Stock remaining available for grant under the Plan.

The Company generally recognizes share-based compensation expense on the grant date and over the period of vesting or period that services will be provided. In April 2023, the Company recognized severance acceleration of $112 of share-based compensation expense resulting from the resignation of the Company’s former Chief Executive Officer and Chief Operating Officer due to a reduction in force that resulted in changes in the composition of the executives of the Company.

Stock Options

The following table summarizes stock option activity for the year ended December 31, 2024:

				Weighted Average
	Options on					Remaining		Aggregate
	Common			Exercise		Contractual		Intrinsic
	Shares			Price		Term		Value
Outstanding January 1, 2024		4,657,635		$	2.52		8.75	$	3,979
Granted		1,613,000		$	2.17
Exercised		(232,081	)	$	2.53
Forfeited, cancelled, expired		(2,094,270	)	$	3.00
Outstanding December 31, 2024		3,944,284		$	2.12		8.30	$	1,486
Exercisable December 31, 2024		1,467,081		$	2.89		7.99	$	398

At December 31, 2024, there were 2,654,118 service-based stock options outstanding, and 1,290,166 performance-based stock options outstanding, 1,290,166 were granted in October 2023 to the Company’s Chief Executive Officer, the vesting of which is subject to future market capitalization targets.

The Company uses the Black-Scholes option pricing model to determine the fair value of service-based options granted. The following table summarizes the assumptions used to compute the fair value of options granted to employees and non-employees:

	For the Year Ended
	December 31,
	2024			2023
Expected stock price volatility		76	%		76	%
Risk-free interest rate		3.82	%		4.21	%
Forfeiture rate		0	%		0	%
Expected dividend yield		0	%		0	%
Expected life of options – years		6.00			6.00
Weighted-average fair value of options granted	$	1.44		$	1.33

Estimated volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate each year during the expected life of awards. The Company’s estimated volatility was based on an average of the historical volatility of peer entities whose stock prices were publicly available. The Company’s calculation of estimated volatility is based on historical stock prices of these peer entities over a period equal to the expected life of the awards. The Company uses the historical volatility of peer entities due to the lack of sufficient historical data of its stock price. The Company records forfeitures as they are incurred.

The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the term of the options. The dividend yield of zero is based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends. The Company calculates the expected life of the options using the Simplified Method for the employee stock options as the Company does not have sufficient historical exercise data.

The Company used the Monte Carlo Simulation Model to value at the grant date the aggregate of 1,290,166 market condition performance options granted in October 2023 to the Company’s Chief Executive Officer. The assumptions used in the Monte Carlo Simulation were stock price on date of grant of $1.40, contract term of 10 years, expected volatility of 76% and risk-free interest rate of 4.65 %. Vesting is based on sustained market capitalization of $100 million, $150 million and $200 million and expected to be exercised at the midpoint of the vesting period resulted in implied service periods ranging from approximately 1 to 3 years.

Stock option expense was $1,132 and $967 for the years ended December 31, 2024 and 2023, respectively.

The following table summarizes information about stock options outstanding at December 31, 2024:

			Weighted
			Average		Weighted				Weighted
			Remaining		Average				Average
Range of	Number		Contractual		Exercise		Number		Exercise
Exercise Prices	Outstanding		Life (Years)		Price		Exercisable		Price
$1.00 – $2.00		2,870,309		9.08	$	1.43		710,257	$	1.39
$2.01 – $3.00		459,000		8.95	$	2.47		291,849	$	2.45
$3.01 – $4.00		150,000		9.08	$	3.88		-	$	-
$4.01 – $5.00		91,475		6.09	$	4.38		91,475	$	4.38
$5.01 – $6.58		373,500		6.02	$	5.71		373,500	$	5.71

Restricted Stock Units

The Plan provides for the grant of restricted stock units (“RSUs”). RSUs are settled in shares of the Company’s Common Stock as the RSUs become vested. The following table summarizes RSU activity for the years ended December 31, 2024 and 2023:

				Weighted Average		Weighted Average
	Service-Based			Grant Date		Vesting
	RSU’s			Fair Value		Period (Years)
Unvested at January 1, 2023		922,332		$	2.88		2.11
Granted - service based		1,289,784		$	1.41
Vested		(1,056,360	)	$	1.83
Forfeited and cancelled		(345,168	)	$	2.70
Unvested at December 31, 2023		810,588		$	1.73		2.52
Granted - service based		881,004		$	2.60
Vested		(465,763	)	$	2.03
Forfeited and cancelled		(237,727	)	$	2.26
Unvested at December 31, 2024		988,102		$	2.25		3.67

482,143 of the RSUs granted included in the table above were granted in October 2023 are performance based RSUs, and 632,911 are performance based RSUs that were granted in January 2024, both subject to vesting terms based on future market capitalization.

RSU expense was $1,301 and $1,018 for the years ended December 31, 2024 and 2023, respectively.

Share-Based Compensation Expense

The Company recorded share-based compensation in its statements of operations for the relevant periods for options and RSUs as follows:

	For the Year Ended
	December 31,
	2024		2023
Selling, general and administrative	$	2,296	$	1,696
Research and development		137		289
Total share-based expense	$	2,433	$	1,985

As of December 31, 2024, total estimated compensation cost of stock options granted and outstanding but not yet vested was $2,304 which is expected to be recognized over the weighted average period of 2.27 years.

As of December 31, 2024, total estimated compensation cost of RSUs granted and outstanding but not yet vested was $1,630 which is expected to be recognized over the weighted average period of 3.03 years.