The Company’s amended and restated certificate of incorporation, filed on December 14, 2017, authorizes the Company to issue 10,000,000 shares of preferred stock and 50,000,000 shares of common stock.

On October 10, 2017, the Company’s board of directors approved and adopted the 2017 Equity Incentive Plan (as amended to date, the “2017 Plan”), subject to stockholder approval thereof. On December 18, 2017, the Company’s stockholders approved the 2017 Plan. The 2017 Plan allows for the grant of a variety of equity vehicles to provide flexibility in the grant and issuance of equity awards, including stock options, unrestricted stock grants, restricted stock units, stock bonuses and performance-based awards. An aggregate of 1,500,000 shares of common stock were initially reserved for issuance under the Plan.

On June 24, 2020, the Company amended its 2017 Equity Incentive Plan to increase the maximum limitation of the number of shares of common stock with respect to one or more Stock Awards (as defined in the 2017 Plan) that may be granted to any one participant under the 2017 Plan during any calendar year from 500,000 shares to 1,000,000 shares. The amendment did not increase the total number of shares of common stock reserved under the 2017 Plan and did not require stockholder approval.

On May 19, 2021, the Company’s stockholders approved the Company’s proposal to increase the number of shares authorized for issuance under the 2017 Plan from 1,500,000 shares to 3,000,000 shares of common stock of the Company pursuant to the terms and conditions of the 2017 Plan. The amendment took effect upon receipt of stockholder approval.

On March 16, 2023, the Company’s board of directors unanimously approved, subject to stockholder approval, an amendment to the 2017 Plan (the “Plan Amendment”), which if approved by our stockholders, would

have resulted in an increase in the number of shares of common stock authorized for issuance thereunder from 3,000,000 to 4,500,000 shares of common stock. The Plan Amendment was presented to stockholders for approval at the Company’s 2023 Annual Meeting of Stockholders; however, the proposal was not approved, and therefor the Plan Amendment was not implemented and the 2017 Plan was not altered.

As contemplated by the A&R Raun Agreement, in connection with the termination of Mr. Raun’s role as chief executive officer and president of the Company, all of those unvested restricted stock units ("RSUs") held by Mr. Raun that were scheduled to vest within twelve months from his termination date (June 5, 2023) became vested as of such date, with the remaining unvested RSUs being forfeited. As a result, the vesting of 150,556 RSUs was accelerated and 52,132 RSUs were forfeited.

On June 5, 2023, in connection with, and as a material inducement to, the appointment of Mr. Knowles as the Company’s new chief executive officer and president, Mr. Knowles was granted (i) non-qualified stock options to purchase 400,000 shares of Company common stock (the “Inducement Options”), which Inducement Options have an exercise price equal to $2.95 per share and will expire ten years from the date of the grant; and (ii) 400,000 restricted stock units (together with the Inducement Options, the “Inducement Grants”).

Both of the Inducement Grants shall vest over a four-year period as follows: 25% on the one-year anniversary of the date of the grant, and the remaining 75% will vest in six equal installments, commencing six months after the one-year anniversary of the date of grant and every six months thereafter until fully vested, subject to Mr. Knowles’ continued employment by the Company.

The Inducement Grants were granted outside of the Company’s 2017 Plan and any other equity incentive plans, and in reliance on the employment inducement exemption provided under the Nasdaq Listing Rule 5635(c)(4).

A summary of stock option activity under each of the Company’s equity incentive plans during the six month period ended June 30, 2023, was as follows:


	Stock Options Outstanding
	Number of Underlying Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding on January 1, 2023		970,680		$	2.07		5.61	$	864,762
Granted		400,000		$	2.95		9.94		-
Forfeited / Canceled		(1,250	)	$	2.10		-	$	962
Exercised		(20,935	)	$	0.61		-	$	47,233
Outstanding on June 30, 2023		1,348,495		$	2.35		2.24	$	816,567
Exercisable as of June 30, 2023		948,495		$	2.10		2.24	$	816,567
Vested and expected to vest as of June 30, 2023		948,495		$	2.10		2.24	$	816,567

The following table presents details of the assumptions used to calculate the weighted-average grant date fair value of common stock options granted by the Company. There were no options granted under the Company's 2017 Plan during the six month period ended June 30, 2022. The following table presents the grant date fair value of options vested and the intrinsic value of options exercised:


	For the Six Months Ended June 30,
	2023			2022
Expected term (in years)		6.16			-
Expected volatility		72.73	%		0.00	%
Risk-free interest rate		3.79	%		0.00	%
Weighted average grant date fair value per share	$	2.95		$	-
Grant date fair value of options vested	$	933,399		$	2,005,285
Intrinsic value of options exercised	$	47,233		$	119,927

As of June 30, 2023, the amount of unearned stock-based compensation estimated to be expensed from 2023 through 2027 related to unvested stock options is $782,295, net of estimated forfeitures, which is expected to be recognized over a weighted average period of 2.27 years.

If there are any modifications or cancellations of the underlying unvested awards, the Company may be required to accelerate, increase, or cancel any remaining unearned stock-based compensation expense or calculate and record additional expense. Future stock-based compensation expense and unearned stock-based compensation will increase to the extent that the Company grants additional common stock options or other stock-based awards.

RSUs may be granted at the discretion of the compensation committee of the Company's board of directors under the Company’s 2017 Plan in connection with the hiring and retention of personnel and are subject to certain conditions. RSUs vest quarterly or semi-annually over a period of one to four years and are typically forfeited if employment is terminated before the RSUs vest. The compensation expense related to the RSUs is calculated as the fair value of the common stock on the grant date and is amortized to expense over the vesting period and is adjusted for estimated forfeitures.

The Company’s RSU activity for the six months ended June 30, 2023, was as follows:


	Restricted Stock Units
	Number of Underlying Shares			Weighted Average Grant Date Fair Value
Unvested on January 1, 2023		907,507		$	4.04
Granted		889,528		$	2.80
Vested		(512,805	)	$	3.79
Canceled		(97,798	)	$	4.32
Unvested on June 30, 2023		1,186,432		$	3.19

As of June 30, 2023, there was $4,177,442 of unrecognized compensation cost related to unvested RSUs, which is expected to be recognized over a weighted average period of 1.73 years.

Stock-based compensation expense for the three and six month periods ended June 30, 2023 and 2022, was comprised of the following:


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
Stock-based compensation classified as:	2023		2022		2023		2022
General and administrative	$	651,291	$	300,346	$	945,286	$	502,441
Production		86,528		70,959		153,969		126,415
Marketing and selling		86,516		104,364		146,504		186,544
Research and development		73,674		56,967		126,458		100,064
	$	898,009	$	532,636	$	1,372,217	$	915,464

The following table summarizes the Company’s warrant activity during the six months ended June 30, 2023:


	Number of Warrants			Weighted Average Exercise Price
Warrants outstanding – January 1, 2023		451,112		$	5.37
Warrants granted		-		$	-
Warrants expired		(380,000	)	$	6.00
Warrants exercised		(28,090	)	$	1.78
Warrants outstanding – June 30, 2023		43,022		$	2.15