NOTE 12 — SHARE-BASED COMPENSATION

The Company adopted its 2024 Equity Incentive Plan in January 2024 to provide equity-based compensation incentives in the form of options, restricted stock unit awards, performance awards, restricted stock awards, stock appreciation rights, and other forms of awards to employees, directors and consultants, including employees and consultants or affiliates, to purchase the Company’s common stock in order to motivate, reward and retain personnel. Upon adoption, an aggregate of 1,700,000 shares of common stock was reserved for grant and issuance pursuant to the equity incentive plan. On November 17, 2025, the stockholders of the Company approved and adopted an amendment to the Company’s 2024 Equity Incentive Plan, as amended, at its 2025 annual meeting of stockholders to increase the number of shares of common stock available for issuance thereunder from 1.7 million to 4.2 million.

Options

A summary of option activity for the years ended December 31, 2025 and 2024 is presented below:

Options granted during the year ended December 31, 2025 and 2024 were valued using the Black-Scholes option-pricing model with the following assumptions.

The Company estimates its expected volatility by using a combination of historical share price volatilities of similar companies within our industry. The risk-free interest rate assumption is based on observed interest rates for the appropriate term of the Company’s options on a grant date. The expected option term assumption is estimated using the simplified method and is based on the mid-point between vest date and the remaining contractual term of the option, since the Company does not have sufficient exercise history to estimate expected term of its historical option awards.

Share-based compensation related to options is included in the consolidated statements of operations as follows:

Compensation cost related to non-vested option awards not yet recognized as of December 31, 2025 was $0.9 million and will be recognized over the next 2.75 years.

Restricted Stock Units (“RSUs”)

On March 8, 2023, the Company amended a stock option agreement originally issued on September 1, 2022 to purchase 111,198 shares of common stock at the initial public offering price. The amendment issued 111,198 RSUs in lieu of the 111,198 stock options. One-half of the RSUs vest over three years and half of the RSUs vest upon the completion of certain performance milestones. On September 1, 2023, 13,900 RSUs vested into shares of common stock, and approximately 1,158 shares will continue to vest on the first day of each month until the end of the vesting period in 2026. The Company accounted for the amendment as a modification. The Company determined the modification of the time-based awards to be a Type I: Probable-to-probable modification, under ASC 718-20. The Company performed a fair value calculation of the awards immediately before and after the modification, resulting in $54 thousand of incremental cost to be recorded, which will be recognized on a straight-line basis over the remaining requisite service period. The Company determined the modification of the performance-based awards to be a Type IV: Improbable-to-improbable modification, under ASC 718-20. The compensation cost related to the performance-based awards after the modification is based on the fair value on the modification date. The fair value of the Milestone Vesting RSUs was determined to be $242 thousand. As of December 31, 2025 there has been no compensation cost recognized in relation to the Milestone Vesting RSUs. No share-based compensation expense has been recorded related to the performance-based awards as the Company determined it is currently not probable of being achieved.

A summary of RSU activity for the years ended December 31, 2025 and 2024 is presented below:

The total fair value of RSUs vested during the years ended December 31, 2025 and 2024 was $485 thousand and $352 thousand, respectively.

Stock-based compensation related to RSUs is included in the consolidated statements of operations as follows:

Of the RSUs granted during the year ended December 31, 2025, none were determined to be performance RSUs. Total compensation cost related to non-vested time-based RSUs not yet recognized as of December 31, 2025 was approximately $359 thousand which will be recognized on a straight-line basis through the end of the vesting period in 2028. There was no total compensation cost related to non-vested performance-based RSUs not yet recognized as of December 31, 2025.

Warrants

As of December 31, 2025, the Company had the following warrants outstanding:

The no expense related to the issuance included in general and administrative expense during the years ended December 31, 2025. There was $250 thousand expense related to the issuance of warrants recorded during the year ended December 31, 2024.