NOTE 12: STOCK-BASED COMPENSATION

A summary of outstanding options is included below:

The weighted average remaining contractual life for options exercisable is 5.79 years as of June 30, 2025.

Employee Awards

On April 1, 2025, the Company granted stock options to purchase an aggregate of 567,500 shares of common stock to employees pursuant to the Company’s 2023 Stock Incentive Plan (the “Plan”), which was previously approved by shareholders. The options have an exercise price of $1.95 per share, equal to the closing market price of the Company’s common stock on the grant date.  The options vest in equal annual installments over a three-year period, subject to continued service through each vesting date, and expire ten years from the date of grant. The Company determined the grant-date fair value using the Black-Scholes option pricing model with key assumptions including expected volatility of 96%, expected term of 6.5 years, risk-free interest rate of 4.00%, dividend yield of 0%, and the Company’s stock price of $1.95 as of the valuation date. The awards will be recognized as stock-based compensation expense over the requisite service period in accordance with ASC 718 Compensation - Stock Compensation, based on the grant-date fair value of the options.

On June 2, 2025, the Company granted stock options to purchase an aggregate of 378,000 shares of common stock to employees under the Plan. The options have an exercise price of $3.05 per share, equal to the closing market price of the Company’s common stock on the grant date.  The options vest in equal annual installments over a three-year period, subject to continued service through each vesting date, and expire ten years from the date of grant. The Company determined the grant-date fair value using the Black-Scholes option pricing model with key assumptions including expected volatility of 94%, expected term of 6.5 years, risk-free interest rate of 4.17%, dividend yield of 0%, and the Company’s stock price of $3.05 as of the valuation date. The awards will be recognized as stock-based compensation expense over the requisite service period in accordance with ASC 718 Compensation - Stock Compensation, based on the grant-date fair value of the options.

On June 2, 2025, the Company accelerated the vesting of options to purchase 733,334 shares of common stock. Prior to such acceleration, the vesting of these options depended on the Company’s share price meeting various price targets. One such share price target was an amount equal to the “Guaranteed Price,” as such term is defined in the Merger Agreement by and among the Company, Reflect, CRI Acquisition Corporation, a Delaware corporation, and RSI Exit Corporation, a Texas corporation and representative of the former stockholders of Reflect (“RSI”). On March 14, 2025, the Company and RSI settled and resolved a dispute related to the Guaranteed Consideration. On June 2, 2025, in consideration of the efforts in resolving and settling such dispute, the Compensation Committee of the Company fully vested the 733,334 options. As a result of the amendment and corresponding vesting, the Company recognized stock compensation expense of $1,149 during the three months ended June 30, 2025.

On July 3, 2025, the Company granted 575,000 restricted stock options under the Plan. The restricted stock options vest in three equal installments over a period of three years, subject to continued service through the applicable vesting dates. The grant date fair value of the restricted stock units was estimated at $3.30 per share based on the closing price of the Company's common stock on the grant date. The Company expects to recognize stock-based compensation expense of approximately $1,898 over the requisite service periods.

Stock-based compensation expense recognized for the issuance of stock options for the three months ended June 30, 2025 and 2024, of $1,249 and $3, respectively, was included in general and administrative expense in the Condensed Consolidated Financial Statements. 

Stock-based compensation expense recognized for the issuance of stock options for the six months ended June 30, 2025 and 2024, of $1,251 and $6, respectively, was included in general and administrative expense in the Condensed Consolidated Financial Statements.

At  June 30, 2025, there was $1,713 in unrecognized compensation expense related to unvested share-based awards for employees, which is expected to be recognized over a weighted-average period of approximately 2.84 years.