Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity and Stock-Based Compensation

v3.20.2
Stockholders' Equity and Stock-Based Compensation
6 Months Ended
Jun. 30, 2020
Stockholders' Equity  
Note 7. Stockholders' Equity and Stock-Based Compensation

At June 30, 2020, the Company had 3,809,415 common shares outstanding. Also outstanding were warrants relating to 70,361 shares of common stock, stock options relating to 508,762 shares of common stock, 728,815 shares of Series A convertible preferred stock convertible into 60,735 shares of common stock (plus dividends of $626,185 relating to an additional 19,009 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 $730,501, relating to an additional 40,583 common shares), all totaling 4,741,087 shares of common stock and all common stock equivalents, including accrued preferred stock dividends, outstanding at June 30, 2020.

 

At December 31, 2019, the Company had 3,252,371 common shares outstanding. Also outstanding were warrants relating to 70,361 shares of common stock, stock options relating to 518,551 shares of common stock, 757,770 shares of Series A convertible preferred stock convertible into 63,148 shares of common stock (plus dividends of $556,390 relating to an additional 16,890 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 $569,181, relating to an additional 31,621 common shares), all totaling 4,175,164 shares of common stock and all common stock equivalents, including accrued preferred stock dividends, outstanding at December 31, 2019.

   

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 Stifel, 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.

 

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, the “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 the 2018 ATM agreement.

 

The Company sold 0.5 million shares under the 2019 ATM during the six months ended June 30, 2020. Net proceeds received from the ATM sales during the six months ended June 30, 2020 were approximately $2.7 million. The Company records its ATM sales on a settlement date basis. A total of 15,000 shares sold on June 29, 2020 and June 30, 2020, for total gross proceeds of $66,000, were recorded with settlement dates in the first week in July 2020.

 

The Company sold 0.4 million shares under the 2019 ATM and the 2018 ATM during the six months ended June 30, 2019 that totaled net proceeds of approximately $2.9 million. The Company records its ATM sales on a settlement date basis. A total of 37,000 shares sold on June 27, 2019 and June 28, 2019, for total net proceeds of approximately $24,000, were recorded with settlement dates in the first week in July 2019.

 

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 B 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 not redeemed any of the outstanding Series B Preferred Stock during the six months ended June 30, 2020 and 2019 and from the date of issuance.

 

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. The Company did not force the conversion of any of the outstanding Series B Preferred Stock during the six months ended June 30, 2020 and 2019 and from the date of issuance.

   

Of the $4.0 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 Series B Preferred Stock was initially convertible into 2,666,667 shares of common stock (now convertible into 222,222 shares of common stock 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 January 30, 2018, the date of the closing of the sale of the Series B 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 $3.7 million (rounded) of proceeds allocated to the Series B Preferred Stock to indicate that a beneficial conversion feature (“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.

 

Additionally, comparison of the original $1.50 conversion price prior to the one-for-twelve 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 three months ended June 30, 2020 and 2019 were approximately $45,000 and $42,000, respectively and for the six months ended June 30, 2020 and 2019 were approximately $90,000 and $84,000, respectively.

 

The accumulated dividend (unpaid) at June 30, 2020 and December 31, 2019 was approximately $0.7 million and $0.6 million, respectively. The Series B Preferred Shares outstanding as of June 30, 2020 and December 31, 2019 was 2,666,667 shares with an aggregate liquidation preference of approximately $4.7 million and $4.6 million, including the accumulated dividends at June 30, 2020 and December 31, 2019, respectively.

 

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 August 2, 2019, or if the trading price is more than three times the applicable conversion price (approximately $49.41 per share) at any time. The Company has not redeemed any of the outstanding Series A Preferred Stock during the six months ended June 30, 2020 and 2019 and from the date of 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 each of the three months ended June 30, 2020 and 2019 were approximately $9,000 and for each of the six months ended June 30, 2020 and 2019 were approximately $19,000.

 

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

 

On October 8, 2019, the holder of the Series A Preferred Shares converted 28,107 preferred shares into the 2,922 common shares.

 

On February 10, 2020, the holder of the Series A Preferred Shares converted 11,874 preferred shares into 1,255 common shares.

 

On May 15, 2020, the holder of the Series A Preferred Shares converted 17,080 preferred shares into 1,847 common shares.

 

The Series A Preferred Shares outstanding as of June 30, 2020 was 728,816 shares with an aggregate liquidation preference of approximately $2.6 million, including accumulated dividends, while the Series A Preferred Shares outstanding as of December 31, 2019 was 757,770 shares with an aggregate liquidation preference of approximately $2.6 million, including accumulated dividends.

   

Warrants

 

The Company’s outstanding warrants at June 30, 2020 and December 31, 2019 are below. These warrants are classified within equity on the condensed consolidated balance sheets.

 

 

 

June 30,

 

 

December 31,

 

Outstanding Warrants

 

2020

 

 

2019

 

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, all the 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

 

Adoption of 2020 Stock Plan

 

On March 9, 2020, the Board of Directors adopted the Company’s 2020 Equity Incentive Plan (the “2020 Plan”). The 2020 Plan will become effective subject to adoption of the 2020 Plan by the stockholders at the Company’s 2020 Annual Meeting of Stockholders.

 

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. Lightbridge’s policy is to utilize stock reserved for issuance under the 2015 Plan for issuing shares upon share option exercise.

 

Short-Term Non-Qualified Option Grants

 

On December 2, 2019, the Compensation Committee of the Board granted 86,982 short-term incentive stock options and non-qualified stock options under the 2015 Plan to employees, consultants, and directors of the Company. All of these stock options vested immediately, with a strike price of $3.82, which was the closing price of the Company’s stock on December 2, 2019. These options have a 10-year contractual term, with a fair market value of approximately $2.59 per option with an expected term of 5 years. During the year ended December 31, 2019, the Company issued 4,247 stock options to a consultant. There were no new issuances during the six months ended June 30, 2020.

 

Total stock options outstanding at June 30, 2020 and December 31, 2019 under the 2006 Stock Plan and 2015 Plan were 508,762 and 518,551, of which 425,118 and 433,678 of these options were vested at June 30, 2020 and December 31, 2019, respectively.

 

The components of stock-based compensation expense included in the Company’s condensed consolidated statements of operations for the three months and six months ended June 30, 2020 and 2019 are as follows:

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses

 

 

 

 

$

113,488

 

 

 

 

 

$

283,622

 

General and administrative expenses

 

$

6,085

 

 

 

123,784

 

 

$

12,170

 

 

 

288,663

 

Total stock-based compensation expense

 

$

6,085

 

 

$

237,272

 

 

$

12,170

 

 

$

572,285

 

 

Stock option transactions to the employees, directors and consultants are summarized as follows for the six months ended June 30, 2020:

 

 

 

Options Outstanding

 

 

Weighted

Average

Exercise Price

 

 

Weighted-

Average Grant Date Fair Value

 

 

 

 

 

 

 

 

 

 

 

Beginning of the period – January 1, 2020

 

 

518,551

 

 

$

21.99

 

 

$

15.89

 

Granted

 

 

 

 

 

 

 

 

 

Exercised

 

 

(6,548

)

 

 

3.82

 

 

 

2.59

 

Forfeited

 

 

(1,844

)

 

 

10.80

 

 

 

8.33

 

Expired

 

 

(1,397

)

 

 

519.00

 

 

 

467.31

 

End of the period – June 30, 2020

 

 

508,762

 

 

$

20.90

 

 

$

14.85

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options exercisable

 

 

425,118

 

 

$

22.90

 

 

$

16.15

 

 

A summary of the status of the Company’s non-vested options as of June 30, 2020 and December 31, 2019, and changes during the six months ended June 30, 2020, is presented below: 

 

 

 

Shares

 

 

Weighted

Average

Exercise Price

 

 

Weighted-

Average Fair

Value

Grant Date

 

 

 

 

 

 

 

 

 

 

 

Non-vested – January 1, 2020

 

 

84,873

 

 

$

10.73

 

 

$

5.15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Granted

 

 

 

 

 

 

 

 

 

Vested

 

 

 

 

 

 

 

 

 

Forfeited

 

 

(1,229

)

 

 

10.80

 

 

 

8.33

 

Non-vested – June 30, 2020

 

 

83,644

 

 

$

10.73

 

 

$

5.10

 

 

The above tables include options issued and outstanding as of June 30, 2020 as follows:

 

i)

A total of 9,638 non-qualified 10-year options have been issued, and are outstanding, to advisory board members at an exercise price range of $8.28 to $336.60 per share.

 

ii)

A total of 393,408 incentive stock options and non-qualified 10-year options have been issued, and are outstanding, to the directors, officers, and employees at an exercise price range of $3.82 to $492.00 per share. From this total, 128,010 options are outstanding to the Chief Executive Officer, who is also a director, with remaining contractual lives of 0.7 years to 9.4 years. All other options issued to directors, officers, and employees have a remaining contractual life ranging from 0.7 years to 9.4 years.

 

iii)

A total of 105,716 non-qualified 10-year options have been issued, and are outstanding, to consultants at an exercise price range of $3.82 to $355.80 per share.

 

As of June 30, 2020, there was approximately $29,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the equity incentive plans. That cost is expected to be recognized over a weighted-average period of approximately 1.74 years. For stock options outstanding at June 30, 2020 and December 31, 2019, the intrinsic value was approximately $54,000 and $59,000, respectively.

   

The following table provides certain information with respect to the above-referenced stock options that were outstanding and exercisable at June 30, 2020:

 

 

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

 

$

3.82-$12.48

 

 8.66

 

217,545

 

$

 8.17

 

 8.93

 

 136,533

 

$

 6.69

 

$

12.49-$24.00

 

 7.12

 

199,790

 

$

 14.19

 

 7.11

 

 197,158

 

$

 14.21

 

$

24.01-$72.00

 

 5.44

 

65,333

 

$

 55.07

 

 5.44

 

 65,333

 

$

 55.07

 

$

72.01-$240.00

 

 4.87

 

24,526

 

$

 75.59

 

 4.87

 

 24,526

 

$

 75.59

 

$

240.01-$492.00

 

 0.56

 

1,568

 

$

 361.43

 

 0.56

 

 1,568

 

$

 361.43

 

Total

 

 7.43

 

508,762

 

$

 20.90

 

 7.28

 

 425,118

 

$

 22.90