6. Stock Based Awards

Equity Incentive Plans

The Company adopted an equity incentive plan in 2007 (the “2007 Plan”). The 2007 Plan has expired and the Company no longer issues any awards under the 2007 Plan. As of September 30, 2022, there are 425 of outstanding incentive stock options granted under the 2007 Plan that are eligible to purchase shares of the Company’s common stock at an exercise price equal to no less than the fair market value of such stock on the date of grant. The maximum term of options granted under the 2007 Plan was ten years.

The Company adopted a second equity incentive plan in 2015 (the “2015 Plan”) under which 833,333 shares of common stock have been reserved for issuance to employees, and nonemployee directors and consultants of the Company. Recipients of incentive stock options granted under the 2015 Plan shall be eligible to purchase shares of the Company’s common stock at an exercise price equal to no less than the estimated fair market value of such stock on the date of grant. The maximum term of options granted under the 2015 Plan is ten years. On June 16, 2021, the Company’s stockholders voted to approve an amendment to the 2015 Plan to increase the number of shares of common stock authorized for issuance under the 2015 Plan from 416,667 to 833,333 shares. As of September 30, 2022, 483,833 shares remain available for future grants under the 2015 Plan.

In July 2021, the Compensation Committee of the Company’s Board of Directors granted a total of 86,417 stock options with a fair value of $964,000 effective as of July 16, 2021. This follows action, taken by the Board in April 2021 and later by the stockholders in June 2021, to amend the Company’s 2015 Equity Incentive Plan. The Company granted the stock options to directors, executives, employees, and consultants. The options are ten-year incentive stock options exercisable at $13.32 per share and vesting as follows: one-half vested on the one-year anniversary of the grant date and the remainder vest in eight equal quarterly instalments on the last day of March, June, September and December, with the first such quarterly instalment having vested on September 30, 2022.

The following table summarizes stock option transactions for the 2007 Plan and 2015 Plan, collectively, for the nine months ended September 30, 2022 (in thousands, except per share amounts):

 Schedule of Share-based Compensation, Stock Options, Activity

The Company accounts for share-based awards to employees and nonemployee directors and consultants in accordance with the provisions of ASC 718, Compensation—Stock Compensation., and under the recently issued guidance following FASB’s pronouncement, ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. Under ASC 718, and applicable updates adopted, share-based awards are valued at fair value on the date of grant and that fair value is recognized over the requisite service, or vesting, period. The Company values its equity awards using the Black-Scholes option pricing model, and accounts for forfeitures when they occur. During the period ended September 30, 2022, the Company granted 158,000 stock options with a fair value of $633,000. For the three and nine months ended September 30, 2022 and 2021, equity-based compensation expense recorded was $216,000 and $696,000 and $205,000 and $502,000 respectively.

The fair value of share option award is estimated using the Black-Scholes option pricing method based on the following weighted-average assumptions:

 Schedule of Weighted Average Assumptions Used for Grants

As of September 30, 2022, there was approximately $1,210,000 of total unrecognized compensation expense related to non-vested stock options that is expected to be recognized over a weighted average period of 1.3 years. For options granted and outstanding, there were 350,000 options outstanding which were fully vested or expected to vest, with an aggregate intrinsic value of $0, a weighted average exercise price of $15.12 and weighted average remaining contractual term of 8.7 years at September 30, 2022. For vested and exercisable options, outstanding shares totaled 131,500, with an aggregate intrinsic value of $0. These options had a weighted average exercise price of $27.48 per share and a weighted-average remaining contractual term of 7.4 years at September 30, 2022.

The aggregate intrinsic value of outstanding and exercisable options at September 30, 2022 was calculated based on the closing price of the Company’s common stock as reported on The Nasdaq Capital Market on September 30, 2022 of $3.48 per share less the exercise price of the options. The aggregate intrinsic value is calculated based on the positive difference between the closing fair market value of the Company’s common stock and the exercise price of the underlying options.

Common Stock Reserved for Future Issuance

The following table presents information concerning common stock available for future issuance (in thousands) as of:

 Schedule of Common Stock Reserved for Future Issuance