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Share-based Compensation | 3 Months Ended
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Mar. 31, 2023
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. On March 23, 2023, the board of directors of the Company approved an increase of the number of shares to be reserved under the Company’s 2019 Plan by 300,000 shares of common stock, or from an aggregate number of 571,429 to 871,429 shares of common stock (the “2019 Plan Increase”). The Company expects the 2019 Plan Increase to satisfy the Company’s anticipated equity incentive award requirements for at least two years. 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 On March 8, 2023, the Company granted a contractor, an option to purchase up to 17,532 shares of the Company’s common stock at a per share exercise price of $2.00 under the Company’s 2019 Plan. This option award vests over a period of 12 months. The following table contains information about the 2019 Plan as of March 31, 2023: Schedule of Information about Incentive Plan
|  | Awards |  |  | Awards |  |  |  |  |  | Awards |
|  | Reserved for Issuance |  |  | Issued & Outstanding |  |  | Awards Exercised |  |  | Available for Grant |
2019 Plan(1) |  |  | 871,429 |  |  |  | 627,219 |  |  |  | 7,183 |  |  |  | 237,027 |
Awards granted outside of the 2019 Plan(2) |  |  | - |  |  |  | 37,037 |  |  |  | 11,364 |  |  |  | - |
(1) | Includes incentive stock options and restricted stock units discussed below.
(2) | Includes shares of restricted common stock granted outside of the 2019 Plan to our Chief Executive Officer, Adam Levy.
The following table summarizes the Company’s incentive stock option activity and related information for the period ended March 31, 2023: Schedule of Incentive Stock Option Activity
|  |  |  |  |  |  |  | Weighted |
|  |  |  |  | Weighted |  |  | Average |
|  |  |  |  | Average |  |  | Contractual |
|  | Number of |  |  | Exercise |  |  | Term in |
|  | Options |  |  | Price |  |  | Years |
Outstanding at January 1, 2023 |  |  | 524,937 |  |  | $ | 2.351416 |  |  |  | 8.38 |
Granted |  |  | 17,532 |  |  |  | 2.00 |  |  |  | 10.0 |
Exercised |  |  | — |  |  |  | — |  |  |  | — |
Forfeited |  |  | — |  |  |  | — |  |  |  | — |
Cancelled |  |  | — |  |  |  | — |  |  |  | — |
Expired |  |  | — |  |  |  | — |  |  |  | — |
Outstanding at March 31, 2023 |  |  | 542,469 |  |  | $ | 2.340058 |  |  |  | 8.20 |
Exercisable at March 31, 2023 |  |  | 351,398 |  |  | $ | 1.777947 |  |  |  | 7.42 |
As of March 31, 2023, vested outstanding stock options had $129 thousand intrinsic value as the exercise price is greater than the estimated fair value of the underlying common stock, respectively. As of March 31, 2023, there was approximately $23 thousand of total unrecognized share-based compensation related to unvested stock options, which the Company expects to recognize over the next 11 months excluding options fully contingent upon certain sales-based milestones being achieved within 18 to 36 months of commercial release. 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 the period ending March 31, 2023: Schedule of Assumptions used in Share-based Compensation
Volatility |  |  | 257.64 | %
Risk-free interest rate |  |  | 4.21 | %
Dividend yield |  |  | 0.0 | %
Expected term |  |  | 5.50 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 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 a closing price of 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). Effective as of January 3, 2023, the Company granted a restricted stock award of 37,037 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 December 30, 2022, all of which shares vested monthly from January 3, 2023 through December 31, 2023. Under ASC 718, the Company has measured the value of the 37,037 shares granted based on the closing price of the Company’s stock at the grant date of the RSU Grant ($1.35 per share). Schedule of Restricted Stock Units Granted
|  |  |  |  | Weighted |
|  |  |  |  | Average |
|  | Number of |  |  | Grant Date |
|  | Units |  |  | Fair Value |
Outstanding at January 1, 2023 |  |  | 90,432 |  |  | $ | 1.43 |
Granted |  |  | 37,037 |  |  |  | 1.35 |
Exercised and converted to common shares |  |  | (5,682 | ) |  |  | 4.40 |
Forfeited |  |  | — |  |  |  | — |
Outstanding at March 31, 2023 |  |  | 121,787 |  |  | $ | 1.68 |
Exercisable at March 31, 2023 |  |  | 30,466 |  |  | $ | 1.68 |
Compensation expense will be recognized ratably over the total vesting schedule. The Company will periodically adjust the cumulative compensation expense for forfeited awards. Stock based compensation of $24 thousand and $55 thousand has been recorded for the year ended March 31, 2023 and 2022, respectively. As of March 31, 2023, there was $116 thousand unrecognized share-based compensation related to unvested RSUs, which the Company expects to recognize over the next 3 years. Warrants The following table shows a summary of common stock warrants through March 31, 2023: Summary of Common Stock Warrants
|  |  |  |  | Weighted |  |  | Weighted |
|  |  |  |  | Average |  |  | Average |
|  | Number of |  |  | Exercise |  |  | Contractual |
|  | Warrants |  |  | Price |  |  | Term in Years |
Outstanding at January 1, 2023 |  |  | 3,637,190 |  |  | $ | 5.16281 |  |  |  | 3.65 |
Granted |  |  | — |  |  |  | — |  |  |  | — |
Exercised |  |  | (30,430) |  |  |  | 0.69 |  |  |  | — |
Forfeited |  |  | — |  |  |  | — |  |  |  | — |
Cancelled |  |  | (49,570) |  |  |  | 1.18 |  |  |  | — |
Expired |  |  | — |  |  |  | — |  |  |  | — |
Outstanding at March 31, 2023 |  |  | 3,557,190 |  |  | $ | 5.256569 |  |  |  | 3.47 |
Exercisable at March 31, 2023 |  |  | 3,557,190 |  |  | $ | 5.256569 |  |  |  | 3.47 |
As of March 31, 2023, vested outstanding warrants had $90 thousand intrinsic value as the exercise price is greater than the estimated fair value of the underlying common stock.

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