| Stockholders' Equity | 7. Stockholders’ Equity The Company’s current Amended and Restated
Certificate of Incorporation dated February 18, 2014 authorizes the issuance of 130,000,000 shares of common stock and 20,000,000 shares
of preferred stock, both with a par value of $0.001 per share. With respect to the preferred stock, 4,500,000 shares are designated Series
A Preferred Stock and 491,222 shares are designated Series B Preferred Stock. At-the-Market Offering Program On May 4, 2023, the Company entered into an
Equity Distribution Agreement to establish an at-the-market offering program, under which the Company may sell from time to time, at
its option, shares of its common stock having an aggregate gross sales price of $5.5 million. The Company is required to pay the Sales
Agents a commission of 3% of the gross proceeds from the sale of shares and has also agreed to provide the Sales Agents with customary
indemnification rights. During the six months ended June 30, 2024, 129,199 shares of the Company’s common stock were sold under
the program at a weighted-average price of $14.64 per share with aggregate proceeds, net of issuance costs, of $1,834. No shares were
sold under the program during the three months ended June 30, 2024. As of the date of this report, the Company may not sell additional
shares under this program. Equity Line of Credit On July 24, 2023 , Beginning on the Commencement Date and for
a period of 24 months thereafter, under the terms and subject to the conditions of the Purchase Agreement, from time to time, at the
Company’s discretion, the Company has the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated
to purchase, up to $10 million of shares of common stock, subject to certain limitations set forth in the Purchase Agreement. Specifically,
from time to time from and after the Commencement Date, the Company may, at its discretion, direct Lincoln Park to purchase on any single
business day on which the closing price of its common stock on The Nasdaq Capital Market (“Nasdaq”) is equal to or greater
than $1.50 up to 10,000 shares of common stock (a “Regular Purchase”); provided, that the Company may direct Lincoln Park
to purchase in a Regular Purchase (i) up to 12,500 shares of common stock, if the closing sale price of its common stock on Nasdaq on
such business day is at least $15.00 per share and (ii) up to 15,000 shares of common stock, if the closing sale price of its common
stock on Nasdaq on such business day is at least $25.00 per share. In no case, however, will Lincoln Park’s commitment with respect
to any single Regular Purchase exceed $500,000; provided, that the parties may mutually agree at any time to increase the maximum number
of shares of common stock the Company may direct Lincoln Park to purchase in any single Regular Purchase to up to 100,000 shares or any
number of shares that shall not exceed 4.99% of the then outstanding shares of common stock. The foregoing share amounts and per share
prices will be adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar
transaction occurring after the date of the Purchase Agreement with respect to our common stock. The purchase price per share for each
such Regular Purchase will be based on prevailing market prices of the Company’s common stock immediately preceding the time of
sale, as determined under the Purchase Agreement. During the six months ended June 30, 2024,
11,231 shares of the Company’s common stock were sold under the program at a weighted-average price of $8.904 per share with aggregate
net proceeds of $96. No shares were sold under the program during the three months ended June 30, 2024. Series A Preferred Stock On February 20, 2024, the Company entered
into a Securities Purchase Agreement (the “Purchase Agreement”) with certain investors, pursuant to which the Company agreed
to sell, issue and deliver to these investors, in a private placement offering (the “Offering”), a total of 172,239 shares
of the Company’s Series A Preferred Stock and warrants (the “Series A Warrants”) to purchase 32,297 shares of common
stock, par value $0.001 per share, of the Company (“Common Stock”) at an exercise price equal to $10.164 per share for an
aggregate offering price of $2,605,000. Additionally, on February 20, 2024, the Investors
agreed to a complete prepayment of the Company’s obligations under the Convertible Notes, including accrued interest, in exchange
for 84,729 shares of Series A Preferred Stock and warrants to purchase 19,637 shares of our common stock at $10.164 per share and the
Convertible Notes were cancelled. The Series A Warrants are immediately exercisable and expire five years from the date of issuance. The Series A Preferred Stock is convertible,
at any time, at the option of the holder into shares of Common Stock. Each share of Series A Preferred Stock shall be convertible, at
any time after the date of issuance, at the option of the holder thereof (or, upon a Required Conversion (as defined below), at the option
of the Corporation), into that number of shares of Common Stock determined by dividing the Stated Value (as defined below) for such share
of Series A Preferred Stock by the Conversion Price (as defined below). “Stated Value” means for any share of Series A Preferred
Stock, an amount equal to the product of (x) $15.125 multiplied by (y) the sum of 1 plus the product of (A) 0.06 multiplied by (B) a
fraction equal to the number of days that such share of Series A Preferred Stock has been issued divided by 365. “Conversion Price”
means (i) for the shares of Series A Preferred Stock issued on the Closing Date, $1.5125 and (ii) for each share of Series A Preferred
Stock issued thereafter, an amount equal to the greater of (x) $1.5125 and the average of the VWAPs for the 10 Trading Days prior the
issuance date of such share of Series A Preferred Stock, in each case subject to adjustment as set forth herein. On any date that ten
out of the last 15 daily VWAPs of the Common Stock is 250% higher than the Conversion Price on such date, then the Company will have
the right to require 50% of the Preferred Stock to be converted into shares of Common Stock. Additionally, on and after the time on which
the Company has $2.25 million in revenues in any single financial quarter, the Company will have the right to require 50% of the Preferred
Stock to be converted into shares of Common Stock (a “Required Conversion”). No dividends are payable on the Series A Preferred
Stock. The Series A Preferred Stock will vote together with the Common Stock on all matters other than as required by law; provided however
that any additional shares underlying the Series A Preferred Stock as a result of the anti-dilution provision described below shall not
vote on an “as converted” basis and shall only vote when issued upon conversion. Notwithstanding the foregoing, the vote
of an individual holder of Series A Preferred Stock (and underlying Common Stock) shall be capped at 9.99% (or 4.99% if selected by the
holder). The Conversion Price is subject to anti-dilution
adjustment as the result of any subdivision, combination of shares or recapitalization, stock dividends, stock splits and similar transactions
affecting the Common Stock. In addition, the Series A Preferred Stock will have weighted average anti-dilution protection providing for
adjustment of the Conversion Price in the event of issuance of, or commitments to issue, Common Stock for less than the Conversion Price
then in effect immediately prior to such issue or sale (a “Dilutive Issuance”), subject to customary exceptions; provided
however the anti-dilution for Dilutive Issuances shall not be operative until the stockholders of the Company have approved the terms
of the Series A Preferred Stock. Upon any liquidation or winding up of the Company (a “Liquidation”), the holders of Series
A Preferred Stock will be entitled to receive in preference to any other class or series of the Company’s equity securities the
greater of (i) the Stated Value plus accrued and unpaid dividends and (ii) what would be paid if the Series A Preferred Stock plus accrued
and unpaid dividends had been converted into Common Stock. A consolidation or merger of the Company or sale or transfer of all or substantially
all of its assets, or any transaction which results in the stockholders of the Company owning less than 50% of the equity or voting power
of the surviving entity (excluding the issuance of Common Stock in any financing transaction unless more than 50% of the Company’s
shares are issued to one stockholder or a number of stockholders who act as a one group) shall be deemed a Liquidation (a “Deemed
Liquidation”) with respect to the shares of Series A Preferred Stock of any holder who opts to have such occurrence treated as
a Deemed Liquidation; provided that if the liquidation preference payable on a Deemed Liquidation is less than 110% of the stated value
of the Series A Preferred Stock, the dividend rate on any accrued and unpaid dividends payable with respect to such Deemed Liquidation
will increase to 10%. All liquidation preferences payable in respect of a Deemed Liquidation will be payable in shares of Common Stock
based on the closing price of the Common Stock on the date of such Deemed Liquidation. Consent of the majority of the holders will be
required to (i) amend the Certificate of Incorporation or Bylaws of the Company so as to adversely alter the rights, preferences, privileges
of the Series A Preferred Stock, (ii) create any new class of shares pari passu or senior to the Series A Preferred Stock or increase
or decrease the number of authorized shares of Common Stock or preferred stock, (iii) pay or declare any dividend on Common Stock or
other junior securities, or incur indebtedness in any single transaction in excess of $1 million or (iv) redeem, purchase or otherwise
acquire any share or shares of preferred stock or Common Stock (other than (a) the repurchase of shares of Common Stock pursuant to a
written benefit plan or employment or consulting agreement, or (b) the repurchase of any equity securities in connection with the Company’s
right of first offer with respect to those securities contained in any written agreement with the Company). Voting rights The holders of vested shares of common stock
are entitled to vote on any matter submitted to a vote of the stockholders and each such holder is entitled to one vote per share of
common stock held. The holders of Series A and Series B Preferred Stock are entitled to vote together with the common stock as a single
class on any matter submitted to a vote of the stockholders. Holders of Series A and Series B Preferred Stock are entitled to the number
of votes equal to the number of common stock issuable upon conversion of their respective Series A and Series B Preferred Stock at the
time such shares are voted. The holders of a majority of the preferred stock had additional voting rights as specified in the Company’s
Amended and Restated Certificate of Incorporation, as amended. Equity awards In 2012, the Board of Directors of the Company
(the “Board”) approved the Tenon Medical, Inc. 2012 Equity Incentive Plan (the “2012 Plan”). The 2012 Plan provides
for the issuance of common stock options, appreciation rights, and other awards to employees, directors, and consultants. Options issued
under the 2012 Plan generally vest over a period of two to four years and have a 10-year expiration date. In April 2021, the Board increased
the number of shares of common stock reserved for issuance under the 2012 Plan to 662,516. In July 2021, the Board increased the number
of shares of common stock reserved for issuance under the 2012 Plan to 737,516. In August 2021, the Board increased the number of shares
of common stock reserved for issuance under the 2012 Plan from 737,516 shares to 799,266 shares and approved the form of a 2022 Equity
Incentive Plan. On January 10, 2022 and February 2, 2022, the
Board and stockholders, respectively, of the Company approved the Tenon Medical, Inc. 2022 Equity Incentive Plan (the “2022 Plan”),
which was effective on April 25, 2022. The number of shares of common stock that may be subject to awards and sold under the 2022 Plan
is equal to 20,000. Automatic annual increases in number of shares available for issuance under the 2022 Plan is equal to the least of
(a) 13,750 shares, (b) 4% of the total number of shares of all classes of common stock outstanding on the last day of the immediately
preceding fiscal year, or (c) such number determined by the 2022 Plan administrator no later than the last day of the immediately preceding
fiscal year. Annual increases will continue until the tenth anniversary of the earlier of the Board or stockholder approval of the 2022
Plan, which is January 10, 2032. Upon the effective date of the 2022 Plan, the Board terminated the 2012 Plan such that no new equity
awards will be issued by the 2012 Plan. Option Exchange On April 8, 2024, the Company issued an offer
to holders of outstanding stock options to purchase an aggregate of 90,987 shares of the Company’s common stock to exchange their
options for a lesser number of new restricted stock units (“RSUs”) to be granted under the 2022 Plan upon the terms and subject
to the conditions set forth in the Offer to Exchange Certain Outstanding Stock Options for Restricted Stock Units (the “Offer to
Exchange”). The Offer to Exchange expired on May 6, 2024. A total of approximately 27 eligible participants participated in the
exchange. The Company accepted for exchange options to purchase an aggregate of approximately 10,424 shares of common stock of the Company.
All surrendered options were cancelled effective as of the expiration of the Option Exchange, and immediately thereafter, in exchange
therefor, the Company granted a total of approximately 5,213 new RSUs under the 2022 Plan. A summary of the Company’s stock option
and restricted stock unit activity under its plans is as follows:
Number
of Shares
Subject to Stock
Options Weighted Number
of Outstanding
Restricted
Stock Units Weighted Average
Grant Date
Fair Value
per Unit
Outstanding at December 31, 2023 12,762 $ 340.32 9,615 $ 556.00
Granted 8,371 $ 6.96 14,919 $ 8.00
Released — — (7,135 ) $ 256.40
Cancelled or forfeited (12,062 ) $ 346.16 (313 ) $ 23.28
Outstanding at June 30, 2024 9,071 $ 24.96 17,087 $ 212.40 The following table sets forth stock-based compensation
expense recognized for the three and six months ended June 30, 2024 and 2023:
Three months ended Six months ended
2024 2023 2024 2023
Research and development $ 358 $ 378 $ 725 $ 750
Sales and marketing 34 58 77 116
General, and administrative 642 618 1,250 1,228
Total stock-based compensation expense $ 1,034 $ 1,054 $ 2,052 $ 2,094 At June 30, 2024, there were 266,340 shares
available for issuance under the 2022 Plan. Warrants In April 2022, in association with the Company’s
initial public offering, the Company granted to The Benchmark Company, LLC and Valuable Capital Limited warrants to purchase a total
of 1,200 shares of the Company’s common stock. The warrants were immediately exercisable at an exercise price of $400.00 per share
and expire on the fifth anniversary of the commencement of sales under the IPO. The fair value of the warrants on the grant date was
$220.00 per warrant, which was calculated using a Black-Scholes option valuation model with an expected term of 5.00 years, expected
volatility of 62.55%, dividend yield of 0%, and risk-free interest rate of 2.92%. The Company recorded the fair value of these warrants
of approximately $264 as an issuance cost to additional paid-in capital in 2022. In June 2023, in connection with a registered
offering of stock, the Company issued warrants to purchase a total of 250,000 shares of the Company’s common stock (the “Offering
Warrants”). The Offering Warrants were exercisable upon issuance and will expire five years from the date of issuance. Per the
terms of the Offering Warrants, the exercise price of the Offering Warrants reset on July 16, 2023, to $25.168 per share. The fair value
of the Offering Warrants on the grant date was approximately $3,164, or $12.64 per warrant, which was calculated using a Monte-Carlo
simulation to estimate the final exercise price, which is considered a Level 3 fair value measurement, using as inputs; the starting
value of $21.00 per share, the Company’s VWAP on June 16; an assumed daily distribution of returns; a mean daily return of 5.18%;
a short-term annual volatility of 100% and a standard deviation of 6.3%. The model used Black-Scholes to then calculate the estimated
fair value of the Offering Warrants, using an estimated time to maturity of 4.9 years, a risk-free interest rate of 3.99% and a long-term
volatility of 60%. In November 2023, in connection with the issuance
of the Convertible Notes, the Company issued warrants to purchase a total of 5,625 shares of the Company’s common stock at an exercise
price equal to $15.52 per share. The warrants expire five years from the issuance date. The fair value of the warrants on the grant date
was $10.32 per warrant, which was calculated using a Black-Scholes option valuation model with an expected term of 5.00 years, expected
volatility of 68.89%, dividend yield of 0%, and risk-free interest rate of 4.41%. The Company recorded the fair value of these warrants
of approximately $58 as an issuance cost to additional paid-in capital in 2023. On February 20, 2024, in connection with the
Purchase Agreement, the Company issued the Series A Warrants to purchase a total of 51,934 shares of the Company’s common stock
at an exercise price equal to $10.164 per share. The Series A Warrants are immediately exercisable and expire five years from the date
of issuance. The fair value of the Series A Warrants on the grant date was $4.88 per warrant, which was calculated using a Black-Scholes
option valuation model with an expected term of 5.00 years, expected volatility of 68.24%, dividend yield of 0%, and risk-free interest
rate of 4.3%. The Company recorded the fair value of these warrants of approximately $254 to additional paid-in capital in 2024. | 9. Stockholders’ Equity The Company’s current Amended and Restated
Certificate of Incorporation dated February 18, 2014 authorizes the issuance of 130,000,000 shares of common stock and 20,000,000 shares
of preferred stock, both with a par value of $0.001 per share. With respect to the preferred stock, 4,500,000 shares are designated Series
A Preferred Stock and 491,222 shares are designated Series B Preferred Stock. As of December 31, 2023 and 2022, there were no shares of
Series A Preferred stock or Series B Preferred Stock issued and outstanding. Initial Public Offering On April 26, 2022, the Company’s Registration
Statement relating to the IPO was declared effective by the SEC. The IPO consisted of 40,000 shares of common stock, par value $0.001
per share at a public offering price of $400.00 per share. Pursuant to the Underwriting Agreement dated April 26, 2022, between the Company,
The Benchmark Company, LLC (“Benchmark”) and Valuable Capital Limited (together with Benchmark, the “Underwriters”),
the Company granted the Underwriters warrants to purchase a total of 1,200 shares of the Company’s common stock at an exercise
price of $400.00 per share. The warrants expire on the fifth anniversary of the commencement of sales under the IPO. On April 27, 2022,
the shares of the Company’s common stock began trading on the Nasdaq Capital Market LLC under the symbol “TNON.” On April 29, 2022, the IPO closed, and the
Company received approximately $13.8 million in net proceeds from the IPO after deducting the underwriting discount and commission and
other estimated IPO expenses payable by the Company. As a result of the completion of the IPO, the Company converted the entirety of
the outstanding principal and accrued interest of the convertible notes payable to 49,443 shares of the Company’s common stock. On April 29, 2022, as result of the completion
of the IPO, the Company converted all shares of Series A and Series B Preferred Stock to 33,667 shares of the Company’s common
stock at the conversion rate detailed below and issued the common stock to the preferred stockholders. Concurrent with the completion of the IPO
and in accordance with the Amended and Restated Exclusive Sales Representative Agreement executed in May 2021, the counterparty to the
agreement received anti-dilution protections to maintain ownership of 3.0% of the fully diluted equity of the Company through the date
of an initial public offering and was issued 3,904 shares of the Company’s common stock to the Representative, fully satisfying
the Company’s obligations. Also, as a result of the completion of the IPO, the Company issued 1,072 shares of its common stock
to a consultant. The value of these shares issued at the IPO price of $400.00 per share was charged to operating expenses in the Company’s
consolidated financial statements. Registered Offering On June 16, 2023, the Company closed the Registered
Offering of a total of 1,000,000 units (the “Units”) for proceeds, net of issuance costs, of $4,808, with each Unit consisting
of (i) one share of the Company’s common stock, and (ii) two warrants, each warrant to purchase one share of the Company’s
common stock at an exercise price equal to $44.80 per share (the “Offering Warrants”). The Offering Warrants were exercisable
upon issuance and will expire five years from the date of issuance. Per the terms of the Offering Warrants, the exercise price reset
on July 16, 2023 to $25.168 per share. At-the-Market Offering Program On May 4, 2023, the Company entered into an
Equity Distribution Agreement to establish an at-the-market offering program, under which the Company may sell from time to time, at
its option, shares of its common stock having an aggregate gross sales price of $5.5 million. The Company is required to pay the Sales
Agents a commission of 3% of the gross proceeds from the sale of shares and has also agreed to provide the Sales Agents with customary
indemnification rights. During the year ended December 31, 2023, 29,013 shares of the Company’s common stock were sold under the
program at a weighted-average price of $18.16 per share with aggregate net proceeds of $495. Equity Line of Credit On July 24, 2023, the Company entered into a purchase
agreement (“Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), under which, subject to
specified terms and conditions, the Company may sell to Lincoln Park up to $10 million of shares of common stock from time to time during
the term of the Purchase Agreement. On September 22, 2023 (the “Commencement Date”), the Company filed a registration statement
with the Securities and Exchange Commission (the “SEC”), covering the resale of shares of common stock issued to Lincoln Park
under the Purchase Agreement. Beginning on the Commencement Date and for a period
of 24 months thereafter, under the terms and subject to the conditions of the Purchase Agreement, from time to time, at the Company’s
discretion, the Company has the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase, up
to $10 million of shares of common stock, subject to certain limitations set forth in the Purchase Agreement. Specifically, from time
to time from and after the Commencement Date, the Company may, at its discretion, direct Lincoln Park to purchase on any single business
day on which the closing price of its common stock on The Nasdaq Capital Market (“Nasdaq”) is equal to or greater than $1.50
up to 10,000 shares of common stock (a “Regular Purchase”); provided, that the Company may direct Lincoln Park to purchase
in a Regular Purchase (i) up to 12,500 shares of common stock, if the closing sale price of its common stock on Nasdaq on such business
day is at least $15.00 per share and (ii) up to 15,000 shares of common stock, if the closing sale price of its common stock on Nasdaq
on such business day is at least $25.00 per share. In no case, however, will Lincoln Park’s commitment with respect to any single
Regular Purchase exceed $500,000; provided, that the parties may mutually agree at any time to increase the maximum number of shares of
common stock the Company may direct Lincoln Park to purchase in any single Regular Purchase to up to 100,000 shares or any number of shares
that shall not exceed 4.99% of the then outstanding shares of common stock. The foregoing share amounts and per share prices will be adjusted
for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction occurring after
the date of the Purchase Agreement with respect to our common stock. The purchase price per share for each such Regular Purchase will
be based on prevailing market prices of the Company’s common stock immediately preceding the time of sale, as determined under the
Purchase Agreement. Voting rights The holders of vested shares of common stock are
entitled to vote on any matter submitted to a vote of the stockholders and each such holder is entitled to one vote per share of common
stock held. The holders of Series A and Series B Preferred Stock were entitled to vote together with the common stock as a single class
on any matter submitted to a vote of the stockholders. Holders of Series A and Series B Preferred Stock were entitled to the number of
votes equal to the number of common stock issuable upon conversion of their respective Series A and Series B Preferred Stock at the time
such shares are voted. The holders of a majority of the preferred stock had additional voting rights as specified in the Company’s
Amended and Restated Certificate of Incorporation, as amended. Equity awards In 2012, the Board of Directors of the Company
(the “Board”) approved the Tenon Medical, Inc. 2012 Equity Incentive Plan (the “2012 Plan”). The 2012 Plan provided
for the issuance of common stock options, appreciation rights, and other awards to employees, directors, and consultants. Options issued
under the 2012 Plan generally vest over a period of two to four years and have a 10-year expiration date. On January 10, 2022 and February 2, 2022, the
Board and stockholders, respectively, of the Company approved the Tenon Medical, Inc. 2022 Equity Incentive Plan (the “2022 Plan”),
which was effective on April 25, 2022. The initial number of shares of common stock subject to awards under the 2022 Plan was 20,000.
The 2022 Plan calls for automatic annual increases in the number of shares available for issuance equal to the least of (a) 13,750 shares,
(b) 4% of the total number of shares of all classes of common stock outstanding on the last day of the immediately preceding fiscal year,
or (c) such number determined by the 2022 Plan administrator no later than the last day of the immediately preceding fiscal year. Annual
increases will continue until the tenth anniversary of the earlier of the Board or stockholder approval of the 2022 Plan, which is January
10, 2032. Upon the effective date of the 2022 Plan, the Board terminated the 2012 Plan such that no new equity awards will be issued by
the 2012 Plan. Compensation expense for the years ended December
31, 2023 and 2022 includes the portion of awards vested in the periods for all equity-based awards granted, based on the grant date fair
value. estimated using a Black-Scholes option valuation model. Grant date fair value for restricted stock units is estimated using the
fair value of the Company’s common stock on the date of grant. Grant date fair value for stock options is estimated using a Black-Scholes
option valuation model using the weighted-average assumptions in the table below: Years ended 2023 2022 Expected volatility 63.89 % 57.68 % Dividend yield 0 % 0 % Risk-free interest rate 4.28 % 3.34 % Expected term in years 5.85 5.85 Estimates of fair value are not intended to predict
actual future events or the value ultimately realized by employees who receive equity awards, and subsequent events are not indicative
of the reasonableness of the original estimates of fair value made by the Company in accordance with authoritative guidance. A summary of the Company’s share option
and restricted stock unit activity under its plans is as follows: Options RSUs Number of Weighted- Weighted- Number of Weighted Balance as of December 31, 2021 9,093 $ 425.44 7.12 - Granted 2,143 $ 183.84 16,483 $ 634.32 Balance as of December 31, 2022 11,236 $ 379.36 8.10 16,483 $ 634.32 Granted 1,881 $ 103.28 938 $ 23.28 Released - - (7,650 ) $ 656.32 Canceled (356 ) $ 318.96 (156 ) $ 708.80 Balance as of December 31, 2023 12,761 $ 340.32 7.41 9,615 $ 556.00 Exercisable at December 31, 2023 8,829 $ 389.28 6.86 The weighted-average grant-date fair value
of options granted during the years ended December 31, 2023 and 2022 was $61.04 and $103.20, respectively. The aggregate intrinsic value
of outstanding options at December 31, 2023 was $0. The aggregate intrinsic value is equal to the difference between the exercise price
of the underlying option and the fair value of the Company’s common stock for in-the-money options. As of December 31, 2023, total
compensation cost not yet recognized related to unvested options was $414, which is expected to be recognized over a weighted-average
period of 0.99 years, and total compensation costs not yet recognized related to unvested RSUs was $4,773, which is expected to be recognized
over a weighted-average period of 1.40 years. The following table sets forth stock-based compensation
expense recognized for the years ended December 31, 2023 and 2022:
Years ended
2023 2022
Research and development $ 1,504 $ 995
Sales and marketing 217 117
General, and administrative 2,424 1,785
Total stock-based compensation expense $ 4,145 $ 2,897 At December 31, 2023, there were 37,486 shares
available for issuance under the 2022 Plan. Warrants In April 2022, as noted above, the Company
granted the Underwriters warrants to purchase a total of 1,200 shares of the Company’s common stock. The warrants are immediately
exercisable at an exercise price of $400.00 per share and expire on the fifth anniversary of the commencement of sales under the IPO.
The fair value of the warrants on the grant date was $220.00 per warrant, which was calculated using a Black-Scholes option valuation
model with an expected term of 5.00 years, expected volatility of 62.55%, dividend yield of 0%, and risk-free interest rate of 2.92%.
The Company recorded the fair value of these warrants of approximately $264 as an issuance cost to additional paid-in capital in 2022.
As the IPO issuance costs were also recorded to additional paid-in capital, the net impact was $0. In June 2023, as noted above, in connection
with the Registered Offering, the Company issued Offering Warrants to purchase a total of 250,000 shares of the Company’s common
stock. The Offering Warrants were exercisable upon issuance at an exercise price of $44.80 per share and will expire five years from
the date of issuance. Per the terms of the Offering Warrants, the exercise price of the Offering Warrants reset on July 16, 2023, to
a price equal to the greater of (i) $22.40 per share and (ii) 100% of the last VWAP (as defined in the Warrants) on July 14, 2023, which
was $25.168 per share. The fair value of the Offering Warrants on the grant date was approximately $3,164, or $12.64 per warrant, which
was calculated using a Monte-Carlo simulation to estimate the final exercise price, which is considered a Level 3 fair value measurement,
using as inputs; the starting value of $24.00 per share, the Company’s VWAP on June 16; an assumed daily distribution of returns;
a mean daily return of 5.18%; a short-term annual volatility of 100% and a standard deviation of 6.3%. The model used Black-Scholes to
then calculate the estimated fair value of the Offering Warrants, using an estimated time to maturity of 4.9 years, a risk-free interest
rate of 3.99% and a long-term volatility of 60%. Based on the accounting guidance under ASC 815, the Company determined that the Offering
Warrants did not meet the criteria for classification as equity as of June 30, 2023. Accordingly, the Company classified the fair value
of the Offering Warrants as a liability. As of July 16, 2023, with the resolution of the reset value, the Company has determined that
the Offering Warrants do meet the criteria for classification as equity and the fair value of the Offering Warrants has been reclassified
to additional paid-in capital on the Company’s consolidated balance sheet as of that date. In November 2023, in connection with the issuance
of the Convertible Notes, the Company issued warrants to purchase a total of 5,625 shares of the Company’s common stock at an exercise
price equal to $15.52 per share. The warrants expire five years from the issuance date. The fair value of the warrants on the grant date
was $10.32 per warrant, which was calculated using a Black-Scholes option valuation model with an expected term of 5.00 years, expected
volatility of 68.89%, dividend yield of 0%, and risk-free interest rate of 4.41%. The Company recorded the fair value of these warrants
of approximately $58 as an issuance cost to additional paid-in capital in 2023. |
