Quarterly report pursuant to Section 13 or 15(d)

Stockholders Equity and StockBased Compensation

v3.22.2
Stockholders Equity and StockBased Compensation
6 Months Ended
Jun. 30, 2022
Stockholders Equity and StockBased Compensation  
Note 6. Stockholders' Equity And Stock-based Compensation

Note 6. Stockholders’ Equity and Stock-Based Compensation

 

At June 30, 2022, the Company had 11,009,000 common shares outstanding (including outstanding RSAs totaling 188,588 shares). Also outstanding were stock options relating to 520,565 shares of common stock and performance-based RSA awards of 188,588 shares, all totaling 11,718,153 shares of common stock and all common stock equivalents, outstanding at June 30, 2022. The performance-based RSA awards of 188,588 shares are not included as common stock outstanding due to managements’ probability assessment of not meeting the performance-based milestone at June 30, 2022.

 

At December 31, 2021, the Company had 9,759,223 common shares outstanding (including outstanding RSAs totaling 188,588 shares). Also outstanding were warrants relating to 45,577 shares of common stock, stock options relating to 538,713 shares of common stock and performance-based RSA awards of 188,588 shares, all totaling 10,532,101 shares of common stock and all common stock equivalents, outstanding at December 31, 2021. The performance-based RSA awards of 188,588 shares are not included as common stock outstanding due to managements’ probability assessment of not meeting the performance-based milestone at December 31, 2021.

 

Common Stock Equity Offerings

 

ATM Offerings

 

On May 28, 2019, the Company entered into an at-the-market (ATM) equity offering sales agreement with Stifel, Nicolaus & Company, Incorporated (Stifel), which was amended on April 9, 2021, 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. On March 25, 2021, the Company filed a new shelf registration statement on Form S-3, registering the sale of up to $75 million of the Company’s securities, which registration statement was declared effective on April 5, 2021. The Company filed a prospectus supplement, dated April 9, 2021, with the SEC pursuant to which the Company offered and sold shares of common stock having an aggregate offering price of up to $9.0 million through its ATM. After this offering was completed, the Company filed a second prospectus supplement, dated November 19, 2021, with the SEC pursuant to which the Company may offer and sell shares of common stock having an aggregate offering price of up to $20.0 million from time to time through its ATM.

The Company records its ATM sales on a settlement date basis. The Company sold approximately 1.2 million shares under the ATM for the six months ended June 30, 2022 resulting in net proceeds of approximately $7.6 million under the November 19, 2021 prospectus supplement. No ATM sales occurred during the six months ended June 30, 2021.

 

Preferred Stock Equity Offerings

 

Exchange of Outstanding Series A and Series B Convertible Preferred Stock for Common Shares

 

On October 29, 2021, the Company entered into an agreement with the holder of all of the outstanding Series A Preferred Stock, to exchange all of the outstanding Series A Preferred Stock and the payment-in-kind (PIK) dividends for 262,910 shares of the Company’s common stock ($10 per share induced conversion price), without any cash payments by either party.

 

On December 3, 2021, the Company entered into a series of agreements with all of the holders of the Company’s Series B convertible preferred stock to exchange all outstanding Series B Preferred Stock for shares of the Company’s common stock at an exchange rate equal to the sum of the liquidation preference of the Series B Preferred Stock and the accrued and unpaid dividends thereon, divided by $10.00 per share. Upon the closing of the exchange, the Company issued an aggregate of 522,244 shares of common stock to the holders in exchange for all 2,666,667 issued and outstanding Series B Preferred Stock.

 

The exchange for both Series A and Series B preferred stock was effected without registration under the Securities Act of 1933, as amended, pursuant to the exemption from registration set forth in Section 3(a)(9) of the Securities Act.

 

In accordance with ASC 470-20, the Company accounted for both exchanges as an induced conversion based on the short period of time the exchange offer was open and that all equity securities pursuant to the original terms were exchanged. Pursuant to this accounting guidance, the Company evaluated the fair value of the incremental 183,098 common shares issued to the Series A Preferred stockholders. Based on the $9.57 closing stock price on October 29, 2021, the Company recorded to additional paid-in capital a deemed dividend of $1.8 million at the date of the exchange. Also, the Company evaluated the fair value of the incremental 232,111 common shares issued to the Series B Preferred stockholders. Based on the $7.57 closing stock price on December 3, 2021, the Company recorded to additional paid-in capital a deemed dividend of $1.8 million at the date of the exchange.

 

Warrants

 

The Company did not have any outstanding warrants as of June 30, 2022 and had 45,577 outstanding warrants as of December 31, 2021. The 45,577 warrants that were 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, expired on May 16, 2022.

 

Stock-based Compensation

 

2020 Equity Incentive Plan

 

On March 9, 2020, the Board of Directors adopted the Company’s 2020 Omnibus 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, and (d) Other Stock-Based and Cash-Based Awards.

Stock Options

 

During the six months ended June 30, 2022, the Company issued 13,514 stock options to one consultant. These options were assigned a fair value of $3.70 per share (total fair value of $50,000). The value was determined using the Black-Scholes pricing model. The following assumptions for this option grant were used in the Black-Scholes pricing model:

 

Expected volatility

 

 

115.37 %

Risk free interest rate

 

 

1.02 %

Dividend yield rate

 

 

0

 

Weighted average years

 

2 years

 

Closing price per share - common stock

 

$ 6.27

 

 

Stock options issued to the Company’s employees, directors and consultants are summarized as follows for the six months ended June 30, 2022:

 

 

 

Options

Outstanding

 

 

Weighted Average Exercise Price

 

 

Weighted Average Grant Date

Fair Value

 

Beginning of the year - January 1, 2022

 

 

538,713

 

 

$ 18.51

 

 

$ 12.92

 

Granted

 

 

13,514

 

 

 

6.27

 

 

 

3.70

 

Exercised

 

 

 

 

 

 

 

 

 

Forfeited

 

 

 

 

 

 

 

 

 

Expired

 

 

(31,662 )

 

 

7.29

 

 

 

2.37

 

End of the period – June 30, 2022

 

 

520,565

 

 

$ 18.87

 

 

$ 13.32

 

Options exercisable

 

 

508,799

 

 

$ 19.17

 

 

$ 13.53

 

 

A summary of the Company’s non-vested options as of June 30, 2022 and December 31, 2021, and changes during the six months ended June 30, 2022, is presented below:

 

 

 

Shares

 

 

Weighted Average Exercise Price

 

 

Weighted Average Fair Value

Grant Date

 

Non-vested – December 31, 2021

 

 

11,766

 

 

$ 5.71

 

 

$ 4.25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Granted

 

 

13,514

 

 

 

6.27

 

 

 

3.70

 

Vested

 

 

(13,514 )

 

 

6.27

 

 

 

3.70

 

Forfeited

 

 

 

 

 

 

 

 

 

Non-vested– June 30, 2022

 

 

11,766

 

 

$ 5.71

 

 

$ 4.25

 

 

The above tables include stock options issued and outstanding as of June 30, 2022 as follows:

 

i. A total of 339,855 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 $3.82 to $75.60 per share. From this total, 127,299 options are held by the Chief Executive Officer, who is also a director. All options issued to directors, officers, and employees, including those issued to our Chief Executive Officer, have a remaining contractual life ranging from 2.77 years to 7.43 years.

 

ii. A total of 180,710 non-qualified 2 to 10-year options have been issued, and are outstanding, to consultants at exercise prices of $3.82 to $75.60 per share and have a remaining contractual life ranging from 0.86 years to 9.17 years.

As of June 30, 2022, there was approximately $29,000 of total unrecognized compensation cost related to non-vested stock options granted under the 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, 2022, the intrinsic value was $61,000.

 

The following table provides certain information with respect to the above-referenced stock options that were outstanding and exercisable at June 30, 2022:

 

 

 

 

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-$9.00

 

 

 5.76

 

 

 

123,069

 

 

$

4.76

 

 

 

 5.47

 

 

 

111,303

 

 

$

 4.66

 

$

9.01-$12.48

 

 

 6.10

 

 

 

116,544

 

 

$

10.80

 

 

 

 6.10

 

 

 

116,544

 

 

$

 10.80

 

$

12.49-$24.00

 

 

 4.62

 

 

 

195,090

 

 

$

14.23

 

 

 

 4.62

 

 

 

195,090

 

 

$

 14.23

 

$

24.01-$72.00

 

 

 3.22

 

 

 

62,771

 

 

$

55.07

 

 

 

 3.22

 

 

 

62,771

 

 

$

 55.07

 

$

72.01-$75.60

 

 

 2.66

 

 

 

23,091

 

 

$

75.59

 

 

 

 2.66

 

 

 

23,091

 

 

$

 75.59

 

 

Total

 

 

 4.97

 

 

 

520,565

 

 

$

18.87

 

 

 

 4.88

 

 

 

508,799

 

 

$

 19.17

 

 

Common Share Issuances

 

For the six months ended June 30, 2022 and 2021, the Company issued 4,058 and 5,347 common shares, respectively, to its investor relations firm for services provided during the period.

 

Restricted Stock Awards

 

On November 18, 2021, the Board of Directors approved an equity grant of 188,588 RSAs, with a grant date fair value of approximately $2.0 million, to all of the Company’s employees and two consultants, valued at the stock price on the grant date of $10.69 per share. These RSAs contain a performance-based accelerated vesting provision and a service-based vesting provision, with the service-based vesting provision being one-third vesting on each of the first three anniversaries of the date of grant. As of June 30, 2022 and December 31, 2021, the Company had deemed it not probable that the performance-based vesting provision would be met. These 188,588 shares were included in the total outstanding common shares at June 30, 2022 and December 31, 2021 and compensation expense will be recognized straight line over the three-year vesting period. A total of $0.4 million of compensation expense was recorded for the six months ended June 30, 2022. 

 

Also on November 18, 2021, there was an additional performance-based equity grant of 188,588 RSAs, with a grant date fair value of approximately $2 million, with immediate vesting upon the Company completing a business acquisition in 2022, subject to certain target financial performance metrics. The RSAs were valued at the stock price on the grant date of $10.69 per share. This RSA grant, based on managements’ probability assessment of meeting this milestone at June 30, 2022 and December 31, 2021, was not probable of being met and no stock-based compensation expense was recorded for the six months ended June 30, 2022 and for the year ended December 31, 2021. These 188,588 RSAs were not included in the total outstanding common shares, on the accompanying balance sheets and changes in statements of stockholders’ equity at June 30, 2022 and December 31, 2021. The Company will reassess the probability of achieving this performance condition at each reporting period in 2022 and record the approximately $2 million as an expense as well as include these performance-based RSAs in the total outstanding common shares, if there is a change to management’s assessment that it is probable that this performance-condition will be met.

The following summarizes the Company’s RSAs activity:

 

 

 

 

 

 

Weighted

 

 

 

Number

 

 

Average

 

 

 

of

 

 

Grant Date

 

 

 

Shares

 

 

Fair Value

 

Total RSAs outstanding at January 1, 2022

 

 

377,176

 

 

$ 10.69

 

Total RSAs granted

 

 

 

 

$

 

Total RSAs vested

 

 

 

 

$

 

Total RSAs forfeited

 

 

 

 

$

 

Total unvested RSAs outstanding at June 30, 2022

 

 

377,176

 

 

$ 10.69

 

 

Scheduled vesting for outstanding RSAs with service conditions at June 30, 2022 is as follows:

 

 

 

Year Ending December 31,

 

 

 

2022

 

 

2023

 

 

2024

 

 

Total

 

Scheduled vesting

 

 

62,862

 

 

 

62,864

 

 

 

62,862

 

 

 

188,588

 

 

As of June 30, 2022, there was approximately $1.6 million of total unrecognized compensation cost related to these unvested RSAs compensation arrangements. The compensation expense will be recognized on a straight-line basis over the three-year vesting period.

 

The components of total stock-based compensation expense included in the Company’s condensed consolidated statements of operations for the three and six months ended June 30, 2022 and 2021 are as follows (dollars in millions):

 

 

 

For the Three Months Ended June 30,

 

 

For the Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

General and administrative expenses

 

$ 0.2

 

 

$ 0.2

 

 

$ 0.4

 

 

$ 0.2

 

Total stock-based compensation expense

 

$ 0.2

 

 

$ 0.2

 

 

$ 0.4

 

 

$ 0.2