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STOCK OPTIONS AND WARRANTS

6 Months Ended

Jun. 30, 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 June 30, 2023 and 2022, the Company issued stock options to purchase 317,500 and 265,000 shares of Common Stock at a weighted average exercise price of $0.41 and $1.29 per share respectively, and for the six months ended June 30, 2023 and 2022, the Company issued stock options to purchase 317,500 and 555,000 shares of Commons Stock at a weighted average exercise price of $0.41 and $2.32 per share respectively, to certain members of the Board of Directors, employees and consultants. The stock options allow the holders to purchase shares of Common Stock at prices between $0.41 and $7.50 per share. Options for the purchase of 500,000 shares of common stock expired as of June 30, 2023. The following table summarizes all stock options as of June 30, 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		318			-
Forfeited		(500	)		-
Exercised		-			-

Outstanding, at June 30		3,437	⁽³⁾		2.85		4.1

Exercisable, at June 30		1,821	⁽⁴⁾		3.32		3.6

⁽¹⁾	Represents the weighted average exercise price.

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

⁽³⁾	As of June 30, 2023, the aggregate intrinsic value of stock options outstanding was $0.1 million.

⁽⁴⁾	As of June 30, 2023, the aggregate intrinsic value of exercisable stock options was $0.

For the six months ended June 30, 2023, the valuation assumptions for stock options granted under the 2017 Plan and the 2019 Plan were estimated on the date of grant using the BSM option-pricing model with the following weighted-average assumptions:

	2023

Grant date closing price of Common Stock	$	0.41
Expected term (years)		3.5
Risk-free interest rate		3.8	%
Volatility		102	%
Dividend yield		0	%

Based on the assumptions set forth above, the weighted-average grant date fair value per share for stock options granted for the six months ended June 30, 2023 was $0.41.

For the three months ended June 30, 2023 and 2022, the Company recognized approximately $0.4 million and $0.7 million, respectively, and for the six months ended June 30, 2023 and 2022, the Company recognized approximately $0.8 million and $1.3 million, respectively, of share-based compensation expense relating to the vesting of stock options. Unrecognized expense relating to these awards as of June 30, 2023 was approximately $2.2 million, which will be recognized over the weighted average remaining term of 4.1 years.

Warrants

The following table sets forth activity with respect to the Company’s warrants to purchase Common Stock for the six months ended June 30, 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		2,138	⁽³⁾
Private placement		11,333	⁽⁴⁾
Exercised		(4,667	)(5)
Forfeited		(10	)
Outstanding, June 30		12,410	⁽⁶⁾		2.40		6.0

Exercisable, June 30		10,638	⁽⁷⁾		2.51		4.2

⁽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, product development and distribution. 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. In June 2023, the Company granted warrants to consultants in exchange for services. Warrants issued in June 2023 provide for the purchase of an aggregate of 37,500 shares of common stock at an exercise price of $0.41 per share at a fair value of approximately $0.1 million which will be recognized upon the achievement of performance metrics and milestones. For the six months ended June 30, 2023, the Company recognized expense of $0.8 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 June 30, 2023, the aggregate intrinsic value of warrants outstanding was $0.

⁽⁷⁾	As of June 30, 2023, the aggregate intrinsic value of warrants exercisable was $0.25 million.

For the six months ended June 30, 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		3.9	%
Volatility		102	%
Dividend yield		0	%

	⁽¹⁾	Weighted average grant price.

	⁽²⁾	The valuation of warrants is based on the expected term.