All common shares, warrants, and stock option amounts and certain market price per share amounts for all periods reported below has been retroactively adjusted to reflect the Company’s one-for-twelve reverse stock split, which was effective October 21, 2019.

 

At September 30, 2019, there were 3,249,353 common shares outstanding, and there were also outstanding warrants relating to 70,361 shares of common stock, stock options relating to 435,979 shares of common stock, 785,877 shares of Series A convertible preferred stock convertible into 65,490 shares of common stock (plus accrued dividends of $529,929 relating to an additional 16,088 common shares), and 2,666,667 shares of Series B convertible preferred stock convertible into 222,222 shares of common stock (plus accrued dividends of $490,595, relating to an additional 27,255 common shares), all totaling, 4,086,748 shares of common stock and all common stock equivalents, including accrued preferred stock dividends, outstanding at September 30, 2019.

 

At December 31, 2018, there were 2,738,508 common shares outstanding, and there were also outstanding warrants relating to 70,361 shares of common stock, stock options relating to 467,013 shares of common stock, 813,624 shares of Series A convertible preferred stock convertible into 67,802 shares of common stock (plus accrued dividends of $407,382 relating to an additional 12,367 common shares), and 2,666,667 shares of Series B convertible preferred stock convertible into 222,222 shares of common stock (plus accrued dividends of $262,856, relating to an additional 14,603 common shares), all totaling 3,592,876 shares of common stock and all common stock equivalents, including accrued preferred stock dividends, outstanding at December 31, 2018.

 

Common Stock Equity Offerings

 

ATM Offerings

 

On May 28, 2019, the Company entered into an at-the-market equity offering sales agreement (“2019 ATM”) with Stifel, Nicolaus & Company, Incorporated (“Stifel”), pursuant to which the Company may issue and sell shares of its common stock from time to time through Stifel as the Company’s sales agent. Sales of the Company’s common stock through the Agent, if any, will be made by any method that is deemed to be an “at-the-market” equity offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, pursuant to the Company’s effective shelf registration statement on Form S-3 (File No. 333-223674) filed on March 15, 2018 and declared effective March 23, 2018. Due to the offering limitations currently applicable to the Company under General Instruction I.B.6. of Form S-3 and the Company’s public float as of May 28, 2019, and in accordance with the terms of the sales agreement, the Company may offer and sell shares of its common stock having an aggregate offering price of up to $13,500,000 through this prospectus supplement.

 

On March 30, 2018, the Company entered into an at-the-market issuance sales agreement with B. Riley FBR, Inc. (“B. Riley”) that superseded the prior at-the market agreement with B. Riley (collectively “2018 ATM”), pursuant to which the Company could issue and sell shares of its common stock from time to time through B. Riley as the Company’s sales agent. Effective March 29, 2019, the Company and B. Riley terminated this 2018 ATM agreement.

 

Sales under the 2019 ATM and under the 2018 ATM for the three months and nine months ended September 30, 2019 were 115,527 shares and 508,063 shares (pre-split: approximately 1.4 million shares and 6.1 million shares), respectively. Net proceeds received from the ATM sales during the three months and nine months ended September 30, 2019 were $0.8 million and $3.8 million, respectively. The Company records its ATM sales on a settlement date basis.

 

Sales under the 2018 ATM that were made during the three months and nine months ended September 30, 2018 were 147,327 shares and 1,419,204 shares (pre-split: approximately 1.8 million shares and 17.0 million shares), respectively. Net proceeds received from the ATM sales during the three months and nine months ended September 30, 2018 were $1.7 million and $27.6 million, respectively.

 

Preferred Stock Equity Offerings

 

Series B Preferred Stock - Securities Purchase Agreement

 

On January 30, 2018, the Company issued 2,666,667 shares of newly created Non-Voting Series B Convertible Preferred Stock (the “Series B Preferred Stock”) and associated warrants to purchase up to 55,555 shares of the Company’s common stock to the several purchasers for approximately $4.0 million or approximately $1.50 per share of Series B Preferred Stock and associated warrant. Dividends accrue on the Series B Preferred Stock at the rate of 7% per year and will be paid in-kind through an increase in the liquidation preference per share. The liquidation preference, initially $1.50 per share of Series B Preferred Stock, is the base that is also used to determine the number of common shares into which the Series B Preferred Stock will convert as well as the calculation of the 7% dividend. Each share of Series B Preferred Stock is convertible at the option of the holder into such number of shares of the Company’s common stock equal to the liquidation preference divided by the conversion price of $18 per share subject to adjustments in the case of stock splits and stock dividends.

 

Holders of the Series B Preferred Stock are also entitled to participating dividends whenever dividends in cash securities (other than shares of the Company’s common stock paid on shares of common stock) or property are paid on common shares or shares of Series A Preferred Stock. The amount of the dividends will equal the amount to which the holder would be entitled if all shares of Series B Preferred Stock had been converted to common stock immediately prior to the record date.

 

The warrants had a per share of common stock exercise price of $22.50. The warrants were exercisable upon issuance and expired six months after issuance on July 30, 2018. Warrants were also issued to the investment bank who introduced these investors, which were subsequently transferred to the principal of the investment bank, entitling the holder to purchase 11,119 common shares in the Company at an exercise price of $18 per share, up to and including January 30, 2021. On February 6, 2017 the Company entered into an agreement with this investment bank. The agreement calls for monthly retainer payments of $15,000, which are credited against any transaction introductory fee earned by the investment bank. This agreement calls for a 7% transaction introductory fee and warrants equal to 5% of the total transaction amount, at a strike price equal to the offering price for a three-year term.

 

The holders of the Series B Preferred Stock have no voting rights. In addition, as long as the shares of Series A Preferred Stock are outstanding, the Company may not take certain actions without first having obtained the affirmative vote or waiver of the holders of a majority of the outstanding shares of Series B Preferred Stock. The Company has the option at any time after August 2, 2019 to redeem some or all of the outstanding Series B Preferred Stock for an amount in cash equal to the liquidation preference plus the amount of any accrued but unpaid dividends of the Series B Preferred Stock being redeemed. The holders of the Series B Preferred Stock do not have the ability to require the Company to redeem the Series B Preferred Stock.

 

The Company has the option of forcing the conversion of all or part of the Series B Preferred Stock if at any time the average closing price of the Company’s common stock for a thirty-trading day period is greater than $65.88 prior to August 2, 2019 or greater than $98.82 at any time. The Company can exercise this option only if it also requires the conversion of the Series A Preferred Stock in the same proportion as it is requiring of the Series B Preferred Stock.

 

Of the $4 million proceeds, approximately $0.3 million was allocated to the warrants with the remaining $3.7 million allocated to the Series B Preferred Stock. The 2,666,667 Series B Preferred Stock was initially convertible into 222,222 shares of common stock. The average of the high and low market prices of the common stock on January 30, 2018, the date of the closing of the sale of the preferred stock, was approximately $28.08 per share. At $28.08 per share the common stock into which the Series B Preferred Stock was initially convertible was valued at approximately $6.2 million. This amount was compared to the $3.6 million of proceeds allocated to the Series B Preferred Stock to indicate that a BCF of approximately $2.6 million existed at the date of issuance, which was immediately accreted as a deemed dividend because the conversion rights were immediately effective. This deemed dividend is included on the statement of operations for the nine months ended September 30, 2018.

 

Additionally, comparison of the original $1.50 conversion price prior to the reverse stock split on October 21, 2019 of the PIK dividends to the $2.34 commitment date fair value per share on January 30, 2018 indicates that each PIK dividend will accrete $0.84 of BCF as an additional deemed dividend for every $1.50 of PIK dividend accrued. Total deemed dividends for this PIK dividend for the nine months ended September 30, 2019 and year ended December 31, 2018 were approximately $0.1 million and $0.1 million, respectively.

 

The accumulated dividend (unpaid) at September 30, 2019 and December 31, 2018 was approximately $0.5 million and $0.3 million, respectively. The Series B Preferred Shares outstanding as of September 30, 2019 was 2,666,667 shares with an aggregate liquidation preference of approximately $4.5 million, including accumulated dividends, while the Series B Preferred Shares outstanding as of December 31, 2018 was 2,666,667 shares with an aggregate liquidation preference of approximately $4.3 million, including accumulated dividends. 

 

Series A Preferred Stock - Securities Purchase Agreement

 

On August 2, 2016, the Company issued 1,020,000 shares of newly created Non-Voting Series A Convertible Preferred Stock (the “Series A Preferred Stock”) to General International Holdings, Inc. for $2.8 million or approximately $2.75 per share. Dividends accrue on the Series A Preferred Stock at the rate of 7% per year and will be paid in-kind through an increase in the liquidation preference per share. The liquidation preference, initially $2.7451 per share of Series A Preferred Stock, is the base that is also used to determine the number of common shares into which the Series A Preferred Stock will convert as well as the calculation of the 7% dividend. Each share of Series A Preferred Stock is convertible at the option of the holder into such number of shares of the Company’s common stock equal to the liquidation preference divided by the conversion price of $32.94 per share subject to adjustments in the case of stock splits and stock dividends.

 

Holders of the Series A Preferred Stock are also entitled to participating dividends whenever dividends in cash securities (other than shares of the Company’s common stock) or property are paid on common shares. The amount of the dividends is the amount to which the holder would be entitled if all shares of Series A Preferred Stock had been converted to common stock immediately prior to the record date.

 

The Company has the option of forcing the conversion of the Series A Preferred Stock if the trading price for the Company’s common stock is more than two times the applicable conversion price (approximately $32.94 per share) before the third anniversary of the issuance of the Series A Preferred Stock, or if the trading price is more than three times the applicable conversion price following the third anniversary of issuance. The Company may also redeem the Series A Preferred Stock following the third anniversary of the issuance.

 

The Series A Preferred Stock was initially convertible into 1,020,000 shares of common stock (now convertible into 85,000 common shares when adjusted for the one-for-twelve reverse stock split on October 21, 2019). The average of the high and low market prices of the common stock on August 6, 2016, the date of the closing of the sale of the Series A Preferred Stock, was approximately $39.78 per share. At $39.78 per share the common stock into which the Series A Preferred Stock was initially convertible was valued at approximately $3.4 million. This amount was compared to the $2.8 million of proceeds of the Series A Preferred Stock to indicate that a BCF of approximately $0.6 million existed at the date of issuance in 2016, which was immediately accreted as a deemed dividend because the conversion rights were immediately effective.

 

Additionally, comparison of the $2.7451, original conversion price of the PIK dividends prior to the one-for-twelve reverse stock split on October 21, 2019, to the $3.315 commitment date fair value per share indicates that each PIK dividend will accrete $0.5699 of BCF as an additional deemed dividend for every $2.7451 of PIK dividend accrued. Total deemed dividends for this PIK dividend for the nine months ended September 30, 2019 and year ended December 31, 2018 were approximately $29,000 and $41,000, respectively. 

 

The holders of the Series A Preferred Stock have no voting rights. In addition, as long as 255,000 shares of Series A Preferred Stock are outstanding, the Company may not take certain actions without first having obtained the affirmative vote or waiver of the holders of a majority of the outstanding shares of Series A Preferred Stock. The Company has the option at any time after August 2, 2019 to redeem some or all of the outstanding Series A Preferred Stock for an amount in cash equal to the liquidation preference plus the amount of any accrued but unpaid dividends of the Series A Preferred Stock being redeemed. The holders of the Series A Preferred Stock do not have the ability to require the Company to redeem the Series A Preferred Stock.

 

On April 30, 2018, the holder of the Series A Preferred Shares converted 111,260 preferred shares into 10,407 common shares.

 

On September 30, 2018, the holder of the Series A Preferred Shares were issued 61 common shares in payment of the dividend for the month of April 2018. On the same date, the holder of the Series A Preferred Shares converted 95,116 preferred shares into 9,211 common shares.

 

On April 16, 2019, the holder of the Series A Preferred Shares converted 27,747 preferred shares into the 2,782 common shares.

 

The accumulated dividend (unpaid) at September 30, 2019 and December 31, 2018 was approximately $0.5 million and $0.4 million, respectively. The Series A Preferred Shares outstanding as of September 30, 2019 was 785,877 shares with an aggregate liquidation preference of approximately $2.7 million, including accumulated dividends, while the Series A Preferred Shares outstanding as of December 31, 2018 was 813,624 shares with an aggregate liquidation preference of approximately $2.6 million, including accumulated dividends.

 

Warrants

 

		September 30,				December 31,
Outstanding Warrants		2019				2018
Issued to Investors on October 25, 2013, entitling the holders to purchase 20,833 common shares in the Company at an exercise price of $138.00 per common share up to and including April 24, 2021. In 2016, 4,954 of these warrants were exchanged for common stock, and all remaining warrant holders agreed to new warrant terms, which excluded any potential net cash settlement provisions in exchange for a reduced exercise price of $75.00 per share.			13,665				13,665
Issued to Investors on November 17, 2014, entitling the holders to purchase 45,577 common shares in the Company at an exercise price of $138.60 per common share up to and including May 16, 2022. On June 30, 2016, the warrant holders agreed to new warrant terms, which excluded any potential net cash settlement provisions in order to classify them as equity in exchange for a reduced exercise price of $75.00 per share.			45,577				45,577
Issued to an investment bank and subsequently transferred to a principal of the investment bank regarding the Series B Preferred Stock investment on January 30, 2018, entitling the holder to purchase 11,119 common shares in the Company at an exercise price of $18.00 per share, up to and including January 30, 2021.			11,119				11,119
Total			70,361				70,361

 

Stock-based Compensation – Stock Options

 

2015 Equity Incentive Plan

 

On March 25, 2015, the Compensation Committee and Board of Directors approved the Lightbridge Corporation 2015 Equity Incentive Plan (the “2015 Plan”) to authorize grants of (a) Incentive Stock Options, (b) Non-qualified Stock Options, (c) Stock Appreciation Rights, (d) Restricted Awards, (e) Performance Share Awards, and (f) Performance Compensation Awards to the employees, consultants, and directors of the Company. The shares available for award under the 2015 plan are subject to equitable adjustment for the October 21, 2019 reverse stock split described in Note 1. The 2015 Plan initially authorized a total of 50,000 shares to be available for grant under the 2015 Plan, of which the amount was increased to 116,667 shares in May 2016, 241,667 shares in May 2017, and 525,000 shares in May 2018.

 

Total stock options outstanding at September 30, 2019 and December 31, 2018 under the 2006 Stock Plan and 2015 Plan were 435,979 and 467,013, of which 351,108 and 327,928 of these options were vested at September 30, 2019 and December 31, 2018, respectively.

 

The components of stock-based compensation expense included in the Company’s condensed consolidated statements of operations for the three months and nine months ended September 30, 2019 and 2018 are as follows (rounded in thousands):

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2019				2018				2019				2018
Research and development expenses		$	-			$	162,000			$	284,000			$	728,000
General and administrative expenses			20,000				368,000				308,000				1,223,000
Total stock-based compensation expense		$	20,000			$	530,000			$	592,000			$	1,951,000

 

Long-Term Non-Qualified Option Grants

 

In August 2018, the Compensation Committee of the Board of Directors granted long-term non-qualified stock options relating to 146,066 shares to employees, consultants, and directors of the Company. These stock options have a strike price of $10.80. Out of this total, approximately 128,355 stock options were issued to employees and consultants. These non-qualified stock options contain service, performance, and market conditions of which one must be achieved in order for the options to vest. The service condition vests one-third annually over a 3-year period with accelerated vesting of these options occurring upon applicable performance or market conditions being satisfied by certain milestone dates. Accelerated vesting of these option grants to employees and consultants would occur upon achievement of either of the following performance and market-based milestones:

 

	1.	The Company’s closing stock price is above $36 per share for 10 consecutive trading days by December 31, 2019.
	2.	The Company secures at least $5 million of funding from the Department of Energy by June 30, 2019.

 

The remaining approximately 17,711 stock options were service based options issued to the directors of the Company that vest over a one-year period on the anniversary date of the grant. All options granted have a 10-year contractual term.

 

In accordance with ASC 718, awards with service, market and performance conditions for the employees and consultants were assigned a fair value of $8.28 per share and the awards with service conditions for the directors of the Company were assigned a fair value of $8.40 per share (total value of $1.2 million). The value was determined using a Monte Carlo simulation. The following assumptions were used in the Monte Carlo simulation model:

 

Expected volatility			90	%
Risk free interest rate			2.84	%
Dividend yield rate			0	%
Weighted average years		0.82		years
Closing price per share – common stock		$	10.56

 

The weighted average years remaining of expected life was itself calculated based on a Monte Carlo simulation under which it was assumed that the options would be exercised, if vested, when the stock reached a price of $54, otherwise they would be exercised at expiration, if in the money. The Company determined that it was not probable that the outcome of the above performance-based milestone (i.e., DOE funding) would be met prior to the annual vesting dates. In accordance with ASC 718-10-55-104 the Company then based the amortization period for the compensation expense on the shorter of the explicit service periods or the “derived service period” based solely on the market condition.

 

Stock option transactions to the employees, directors and consultants are summarized as follows for the nine months ended September 30, 2019:

 

		Options Outstanding				Weighted Average Exercise Price				Weighted Average Grant Date Fair Value
Beginning of the period			467,013			$	32.64			$	23.52
Granted			4,246				8.28				5.89
Exercised			—				—				—
Forfeited			(18,175	)			34.32				25.56
Expired			(17,105	)			191.78				147.21
End of the period			435,979			$	26.15			$	18.40
Options exercisable			351,108			$	29.88			$	20.85

 

Stock option transactions of the employees, directors, and consultants are summarized as follows for the year ended December 31, 2018:

 

		Options Outstanding				Weighted Average Exercise Price				Weighted Average Grant Date Fair Value
Beginning of the year			331,407			$	42.96			$	29.88
Granted			148,704				10.80				8.40
Exercised			-				-				-
Forfeited			(11,998	)			13.20				9.96
Expired			(1,100	)			367.20				253.56
End of the year			467,013			$	32.64			$	23.52
Options exercisable			327,928			$	42.00			$	29.88

 

22

Table of Contents

 

A summary of the status of the Company’s non-vested options as of September 30, 2019 and December 31, 2018, and changes during the year ended December 31, 2018 and the nine months ended September 30, 2019, is presented below:

 

		Shares				Weighted- Average Fair Value Grant Date				Weighted Average Exercise Price
Non-vested – December 31, 2017			128,561			$	13.20			$	18.96
Granted			148,705				8.40				10.80
Vested			(126,183	)			15.24				18.96
Forfeited			(11,998	)			9.96				13.20
Non-vested – December 31, 2018			139,085			$	6.48			$	10.92
Granted			4,246				5.89				8.28
Vested			(58,460	)			8.37				10.86
Forfeited			-				-				-
Non-vested – September 30, 2019			84,871			$	5.16			$	10.73

 

The above tables include options issued and outstanding as of September 30, 2019 as follows:

 

i)	A total of 9,636 non-qualified 10-year options have been issued, and are outstanding, to advisory board members at exercise prices of $8.28 to $336.60 per share.
ii)	A total of 391,915 incentive stock options and non-qualified 10-year options have been issued, and are outstanding, to the directors, officers, and employees at exercise prices of $10.80 to $519.00 per share. From this total, 112,968 options are outstanding to the Chief Executive Officer, who is also a director, with remaining contractual lives of 0.4 years to 8.9 years. All other options issued to directors, officers, and employees have a remaining contractual life ranging from 0.4 years to 8.9 years.
iii)	A total of 34,428 non-qualified 3-10-year options have been issued, and are outstanding, to consultants at exercise prices of $10.80 to $519.00 per share.

 

As of September 30, 2019, there was approximately $47,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plans. That cost is expected to be recognized over a weighted-average period of approximately 2.28 years. For stock options outstanding at September 30, 2019, the intrinsic value was $2,000. For stock options outstanding at December 31, 2018, the intrinsic value was $0. 

 

The following table provides certain information with respect to the above-referenced stock options that were outstanding and exercisable at September 30, 2019:

 

			Stock Options Outstanding												Stock Options Vested
			Weighted												Weighted
			Average												Average
			Remaining								Weighted				Remaining								Weighted
			Contractual				Number				Average				Contractual				Number				Average
			Life				of				Exercise				Life				of				Exercise
Exercise Prices			-Years				Awards				Price				-Years				Awards				Price
$	8.28-$12.48			8.88				138,947			$	10.72				8.85				56,708			$	10.80
$	12.49-$24.00			7.82				199,766			$	14.19				7.81				197,134			$	14.21
$	24.01-$72.00			6.14				65,310			$	55.07				6.14				65,310			$	55.07
$	72.01-$240.00			4.74				28,995			$	75.50				4.74				28,995			$	75.50
$	240.01-$519.00			0.88				2,961			$	435.71				0.88				2,961			$	435.71
	Total			7.66				435,979			$	26.15				7.36				351,108			$	29.88

 

The following table provides certain information with respect to the above-referenced stock options that were outstanding and exercisable at December 31, 2018:

 

			Stock Options Outstanding												Stock Options Vested
			Weighted												Weighted
			Average												Average
			Remaining								Weighted				Remaining								Weighted
			Contractual				Number				Average				Contractual				Number				Average
			Life				of				Exercise				Life				of				Exercise
	Exercise Prices		-Years				Awards				Price				-Years				Awards				Price
$	10.80-$12.48			9.60				134,700			$	10.80				—				-			$	—
$	12.49-$24.00			8.57				213,361			$	14.16				8.56				208,976			$	14.16
$	24.01-$72.00			6.86				67,799			$	55.08				6.86				67,799			$	55.08
$	72.01-$240.00			4.16				41,778			$	89.76				4.16				41,778			$	89.76
$	240.01-$519.00			0.72				9,375			$	353.52				0.72				9,375			$	353.52
	Total			8.07				467,013			$	32.64				7.42				327,928			$	42.00