At September 30, 2020, the Company had 4,416,961 common shares outstanding. Also outstanding were warrants relating to 70,361 shares of common stock, stock options relating to 515,985 shares of common stock, 712,126 shares of Series A convertible preferred stock convertible into 59,344 shares of common stock (plus dividends of $657,299 relating to an additional 19,954 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 $813,285, relating to an additional 45,182 common shares), all totaling 5,350,009 shares of common stock and all common stock equivalents, including accrued preferred stock dividends, outstanding at September 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. See Note 9, Subsequent Events, for additional information on the filing of a prospectus supplement and the increase in the aggregate amount that may be issued and sold under the 2019 ATM.

 

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 0.6 million shares and 1.1 million shares under the 2019 ATM during the three and nine months ended September 30, 2020, respectively. Net proceeds received from the ATM sales during the three and nine months ended September 30, 2020 were approximately $2.5 million and $5.1 million, respectively. The Company records its ATM sales on a settlement date basis. A total of 109,500 shares sold on September 29 and September 30, 2020, for total gross proceeds of $476,000, were recorded with settlement dates in the first week in October 2020. See Note 9, Subsequent Events, for additional information on ATM sales made after September 30, 2020.

 

The Company sold 115,527 shares and 508,063 shares under the 2019 ATM and the 2018 ATM during the three and nine months ended September 30, 2019, respectively. Net proceeds received from the ATM sales during the three and nine months ended September 30, 2019 were approximately $0.8 million and $3.8 million, respectively. The Company records its ATM sales on a settlement date basis.

 

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 nine months ended September 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 nine months ended September 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 September 30, 2020 and 2019 were approximately $46,000 and $43,000, respectively and for the nine months ended September 30, 2020 and 2019 were approximately $137,000 and $128,000, respectively.

 

The accumulated dividend (unpaid) at September 30, 2020 and December 31, 2019 was approximately $0.8 million and $0.6 million, respectively. The Series B Preferred Shares outstanding as of September 30, 2020 and December 31, 2019 was 2,666,667 shares with an aggregate liquidation preference of approximately $4.8 million and $4.6 million, including the accumulated dividends at September 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 nine months ended September 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 September 30, 2020 and 2019 were approximately $10,000 and for each of the nine months ended September 30, 2020 and 2019 were approximately $28,000.

 

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 2,782 common shares.

 

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

 

On February 10, 2020, the holder of the Series A Preferred Shares converted 11,875 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.

 

On August 31, 2020, the holder of the Series A Preferred Shares converted 16,689 preferred shares into 1,846 common shares.

 

As of September 30, 2020, there were 712,126 Series A Preferred Shares outstanding, with an aggregate liquidation preference of approximately $2.6 million, including accumulated dividends, while there were  757,770 Series A Preferred Shares outstanding as of December 31, 2019, with an aggregate liquidation preference of approximately $2.6 million, including accumulated dividends.

 

Warrants

 

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

 

		September 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, the 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”). On September 3, 2020, the shareholders approved the 2020 Plan to authorize grants of the following types of awards (a) Options, (b) Stock Appreciation Rights, (c) Restricted Stock and Restricted Stock Units (“RSUs”), and (e) Other Stock-Based and Cash-Based Awards. The shares available for award under the 2020 plan authorized a total of 350,000 shares to be available for grant. See Note 9, Subsequent Events, for additional information on RSU equity grants made under the 2020 Plan after September 30, 2020.

 

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 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.

 

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. The Company issued 7,634 stock options to a consultant during the nine months ended September 30, 2020.

 

Total stock options outstanding at September 30, 2020 and December 31, 2019 under the 2006 Stock Plan and 2015 Plan were 515,985 and 518,551, of which 466,259 and 433,678 of these options were vested at September 30, 2020 and December 31, 2019, respectively.

 

The components of stock-based compensation expense (net of forfeitures of stock options) included in the Company’s condensed consolidated statements of operations for the three months and nine months ended September 30, 2020 and 2019 are as follows (rounded in thousands):

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Research and development expenses			—			$	—				—			$	284,000
General and administrative expenses		$	(4,000	)		$	20,000			$	8,000			$	308,000
Total stock-based compensation expense		$	(4,000	)		$	20,000			$	8,000			$	592,000

 

Stock option transactions to the employees, directors and consultants are summarized as follows for the nine months ended September 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			7,634				4.45				3.28
Exercised			(6,548	)			3.82				2.59
Forfeited			(1,844	)			10.80				8.33
Expired			(1,808	)			501.43				388.45
End of the period – September 30, 2020			515,985			$	20.32			$	14.60
Options exercisable			466,259			$	21.45			$	15.36

 

A summary of the status of the Company’s non-vested options as of September 30, 2020 and December 31, 2019, and changes during the nine months ended September 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			7,634				4.45				3.28
Vested			(41,552	)			10.80				8.29
Forfeited			(1,229	)			10.80				8.33
Non-vested – September 30, 2020			49,726			$	9.71			$	7.44

 

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

 

i)	A total of 393,130 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 $331.80 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 0.5 years to 9.2 years. All other options issued to directors, officers, and employees have a remaining contractual life ranging from 0.5 years to 9.2 years.
ii)	A total of 122,855 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 September 30, 2020, there was approximately $48,000 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 2.26 years. For stock options outstanding at September 30, 2020 and December 31, 2019, the intrinsic value was approximately $28,000 and $59,000, respectively.

 

The following table provides certain information with respect to the above-referenced stock options that were outstanding and exercisable at September 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			8.41				225,179			$	8.04				8.46				176,332			$	7.60
$	12.49-$24.00			6.82				199,790			$	14.19				6.81				198,911			$	14.20
$	24.01-$72.00			5.14				65,333			$	55.07				5.14				65,333			$	55.07
$	72.01-$240.00			4.57				24,526			$	75.59				4.57				24,526			$	75.59
$	240.01-$355.80			0.43				1,157			$	332.91				0.43				1,157			$	332.91
	Total			7.18				515,985			$	20.32				7.07				466,259			$	21.45