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Share-based Compensation
 9 Months Ended
Sep. 30, 2022
Share-Based Payment Arrangement [Abstract]  
Share-based Compensation

10. Share-based Compensation

 

The 2019 Plan provides for the granting of incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights (“SARs”), restricted stock units, performance awards, dividend equivalent rights and other awards, which may be granted singly, in combination, or in tandem, and which may be paid in cash, shares of common stock of the Company or a combination of cash and shares of common stock of the Company. The Company initially reserved a total of 57,143 shares of the Company’s common stock for awards under the 2019 Plan. Effective as of May 26, 2020 and May 3, 2021, respectively, the Board approved an increase of the number of authorized shares of common stock reserved under the 2019 Plan from 57,143 shares of common stock to 485,715 and from 485,715 shares of common stock to 571,429 shares of common stock, all of which may be delivered pursuant to incentive stock options. Subject to adjustments pursuant to the 2019 Plan, the maximum number of shares of common stock with respect to which stock options or SARs may be granted to an executive officer during any calendar year is 14,286 shares of common stock.

 

Incentive stock options

 

The following table contains information about the 2019 Plan as of September 30, 2022:

 

   Awards           Awards 
   Reserved for   Awards   Awards   Available for 
   Issuance   Issued   Exercised   Grant 
2019 Plan   571,429    329,937    7,183    234,309 

 

 

The following table summarizes the Company’s incentive stock option activity and related information for the period ended September 30, 2022:

 

           Weighted 
       Weighted   Average 
       Average   Contractual 
   Number of   Exercise   Term in 
   Options   Price   Years 
Outstanding at January 1, 2022   434,939   $1.675747    8.56 
                
Granted   —    —    — 
Exercised   —    —    — 
Forfeited   —    —    — 
Cancelled   (105,002)   1.40    — 
Expired   —    —    — 
Outstanding at September 30, 2022   329,937   $1.763503    7.83 
Exercisable at September 30, 2022   318,508   $1.726311    7.81 

 

As of September 30, 2022, vested outstanding stock options had $169 thousand intrinsic value as the exercise price is greater than the estimated fair value of the underlying common stock. As of September 30, 2022, there was approximately $85 thousand of total unrecognized share-based compensation related to unvested stock options, which the Company expects to recognize over the next 12 months.

 

The Company recognizes compensation expense for stock option awards on a straight-line basis over the applicable service period of the award. The service period is generally the vesting period. The following assumptions were used to calculate share-based compensation expense for year ended September 30, 2022:

 

Volatility   171.12%-183.48 %
Risk-free interest rate     0.46% - 0.86 %
Dividend yield     0.0 %
Expected term     5.0 - 5.75 years  

 

The Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. Accordingly, the Company has elected to use the “simplified method” to estimate the expected term of its share-based awards. The simplified method computes the expected term as the sum of the award’s vesting term plus the original contractual term divided by two.

 

Based on the lack of historical data of volatility for the Company’s common stock, the Company based its estimate of expected volatility on a weighted-average of the historical volatility of comparable public companies that manufacture similar products and are similar in size, stage of life cycle, and financial leverage.

 

Restrictive stock awards

 

Effective as of August 1, 2022, the Company granted a restricted stock award of 84,750 shares of the Company’s common stock to the certain officers and employees, all of which shares vest in four equal installments on each of January 1, 2023, January 1, 2024, January 1, 2025 and January 1, 2026. Under ASC 718, Compensation-Stock Compensation (“ASC 718”), the Company has measured the value of the 84,750 shares granted based on the closing price of the Company’s stock at the grant date of the RSU Grant ($1.82 per share).

 

Effective as of January 1, 2022, the Company granted a restricted stock award of 11,364 shares of the Company’s common stock to Adam Levy for his service as our Chief Executive Officer pursuant to the terms of his Executive Employment Agreement dated November 4, 2021, all of which shares vested monthly from January 1, 2022 through December 31, 2022. Under ASC 718, the Company has measured the value of the 11,364 shares granted based on the closing price of the Company’s stock at the grant date of the RSU Grant ($4.40 per share).

 

 

On March 8, 2021, the Company granted a restricted stock award of 39,524 shares of the Company’s common stock to Adam Levy for his service as our Chief Executive Officer and Chief Financial Officer from October 1, 2020 through September 30, 2021, all of which shares vested immediately. Under ASC 718, the Company has measured the value of the 39,524 shares granted based on the closing price of the Company’s stock at the grant date of the RSU Grant ($2.10 per share).

 

       Weighted 
       Average 
   Number of   Grant Date 
   Units   Fair Value 
Outstanding at January 1, 2022   —   $— 
Granted   96,114    1.60 
Exercised and converted to common shares   —    — 
Forfeited   —    — 
Outstanding at September 30, 2022   96,114   $1.60 
Exercisable at September 30, 2022   8,523   $4.40 

 

Warrants

 

The following table shows a summary of common stock warrants through September 30, 2022:

 

       Weighted   Weighted 
       Average   Average 
   Number of   Exercise   Contractual 
   Warrants   Price   Term in Years 
Outstanding at January 1, 2022   3,637,190   $5.16281    4.63 
Granted   —    —    — 
Exercised   —    —    — 
Forfeited   —    —    — 
Cancelled   —    —    — 
Expired   —    —    — 
Outstanding at September 30, 2022   3,637,190   $5.16281    3.90 
Exercisable at September 30, 2022   3,637,190   $5.16281    3.90 

 

As of September 30, 2022, vested outstanding warrants had $158 thousand intrinsic value as the exercise price is greater than the estimated fair value of the underlying common stock.