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STOCK OPTIONS AND WARRANTS

3 Months Ended

Mar. 31, 2023

NOTE 9 - STOCK OPTIONS AND WARRANTS

Stock Options

In 2017, the Company’s shareholders approved the adoption of a stock and option award plan (the “2017 Plan”), under which shares were reserved for future issuance for Common Stock options, restricted stock awards and other equity awards. The 2017 Plan permits grants of equity awards to employees, directors, consultants and other independent contractors. The Company’s shareholders have approved a total reserve of 1,333,333 million shares of Common Stock for issuance under the 2017 Plan.

In April 2019, the Company’s shareholders approved the adoption of a stock and option award plan (the “2019 Plan”), under which shares were reserved for future issuance for Common Stock options, restricted stock awards and other equity awards. The 2019 Plan permits grants of equity awards to employees, directors, consultants and other independent contractors. The Company’s shareholders originally approved a total reserve of 333,334 shares of Common Stock for issuance under the 2019 Plan. At each of the Company’s annual meeting of stockholders held in 2020 and 2021, the Company’s stockholders approved amendments to the 2019 Plan to increase the number of shares of Common Stock available for issuance thereunder by an aggregate of 2,033,333 shares of Common Stock such that, after such amendments, and prior to any grants, 2,366,667 shares of Common Stock were available for issuance.

During the three months ended March 31, 2023 and 2022, the Company issued stock options to purchase none and 290,000 shares of Common Stock at a weighted average exercise price of $3.27 per share to certain members of the Board of Directors, employees and consultants. The stock options allow the holders to purchase shares of Common Stock at a price of $3.27 per share. Options for the purchase of 500,000 shares of common stock expired as of March 31, 2023, respectively. The following table summarizes all stock options as of March 31, 2023 (shares in thousands):

SCHEDULE OF STOCK OPTIONS

	2023
	Shares			Price ⁽¹⁾		Term ⁽²⁾

Outstanding, beginning of year		3,619		$	2.89		3.3
Granted		-			-
Forfeited		(500	)		-
Exercised		-			-

Outstanding, at March 31		3,119	⁽³⁾		3.10		4.4

Exercisable, at March 31		1,758	⁽⁴⁾		3.42		3.9

⁽¹⁾	Represents the weighted average exercise price.

⁽²⁾	Represents the weighted average remaining contractual term until the stock options expire.

⁽³⁾	As of March 31, 2023, the aggregate intrinsic value of stock options outstanding was $0.

⁽⁴⁾	As of March 31, 2023, the aggregate intrinsic value of exercisable stock options was $0.

There were no stock options granted for the three months ended March 31, 2023. For the three months ended March 31, 2023 and 2022, the Company recognized approximately $0.3 million and $0.6 million, respectively, of share-based compensation expense relating to the vesting of stock options. Unrecognized expense relating to these awards as of March 31, 2023 was approximately $2.6 million, which will be recognized over the weighted average remaining term of 4.4 years.

Warrants

The following table sets forth activity with respect to the Company’s warrants to purchase Common Stock for the three months ended March 31, 2023 (shares in thousands):

SCHEDULE OF WARRANT OUTSTANDING

	2023
	Shares			Price ⁽¹⁾		Term ⁽²⁾

Outstanding, beginning of year		3,616		$	5.80		2.5
Grants of warrants:
Consultants for services		2,100	⁽³⁾
Private placement		11,333	⁽⁴⁾
Exercised		(4,667	)⁽⁵⁾
Forfeited		(10	)
Outstanding, December 31		12,372	⁽⁶⁾		2.40		6.4

Exercisable, December 31		10,537	⁽⁷⁾		2.53		4.4

⁽¹⁾	Represents the weighted average exercise price.

⁽²⁾	Represents the weighted average remaining contractual term until the warrants expire.

⁽³⁾	In February 2023, the Company granted warrants to consultants in exchange for business development, investor relations and product development. Warrants issued in February 2023 provide for the purchase of an aggregate of 2,100,000 shares of common stock at an exercise price of $0.91 and $0.61 per share with a fair value of approximately $1.3 million which will be recognized upon the achievement of performance metrics and milestones. For the three months ended March 31, 2023, the Company recognized expense of $0.5 million.

⁽⁴⁾	In January 2023, the Company granted warrants in connection with a private placement consisting of pre-funded warrants to purchase up to an aggregate of 4,666,667 shares of common stock at an exercise price of $0.0001 per share, and warrants to purchase up to an aggregate of 6,666,667 shares of common stock at an exercise price of $1.20 per share with a fair value of approximately $14.5 million which was recognized as warrant liability at the time of issuance.

⁽⁵⁾	In March 2023, the Company issued an aggregate of 4,666,667 shares of common stock from the exercise of warrants previously issued in January 2023.

⁽⁶⁾	As of March 31, 2023, the aggregate intrinsic value of warrants outstanding was $0.

⁽⁷⁾	As of March 31, 2023, the aggregate intrinsic value of warrants exercisable was $0.

For the three months ended March 31, 2023, the valuation assumptions for warrants issued were estimated on the measurement date using the BSM option-pricing model with the following weighted-average assumptions:

	2023

Measurement date closing price of Common Stock ⁽¹⁾	$	0.73
Contractual term (years) ⁽²⁾		5.0
Risk-free interest rate		3.7	%
Volatility		100	%
Dividend yield		0	%

	⁽¹⁾	Weighted average grant price.

	⁽²⁾	The valuation of warrants is based on the contractual term of the warrant rather than the expected term.