Note 7. Stockholders’ Equity and Stock-Based Compensation

On June 28, 2021, at the Company’s annual shareholder meeting, the shareholders’ approved an amendment to the Articles of Incorporation of the Company to increase the number of authorized shares of common stock from 8,333,333 shares to 13,500,000 shares and an amendment to the Lightbridge Corporation 2020 Omnibus Incentive Plan to increase the number of shares of common stock available for issuance under this Incentive Plan from 350,000 shares to 650,000 shares.

At December 31, 2021, the Company had 9,759,223 common shares outstanding (including outstanding restricted stock awards 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.

At December 31, 2020, the Company had 6,567,110 common shares outstanding. Also outstanding were warrants relating to 70,361 shares of common stock, stock options relating to 515,847 shares of common stock, 243,800 restricted shares units of common stock, 699,878 shares of Series A convertible preferred stock convertible into 58,323 shares of common stock (plus accrued dividends of $691,120 relating to an additional 20,980 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 $897,518, relating to an additional 49,862 common shares), all totaling 7,748,505 shares of common stock and all common stock equivalents, including accrued preferred stock dividends, outstanding at December 31, 2020.

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 Securities and Exchange Commission 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. The Company, after this offering was completed, filed a second prospectus supplement, dated November 19, 2021, with the Securities and Exchange Commission pursuant to which the Company may offer and sell shares of common stock having an aggregate offering price of up to up to $20.0 million from time to time under this prospectus supplement, through its ATM.

The Company records its ATM sales on a settlement date basis. The Company sold approximately 2.0 million shares under the ATM for the year ended December 31, 2021 resulting in net proceeds of approximately $14.8 million under the two above-mentioned prospectus supplements filed. For the year ended December 31, 2020, the Company sold approximately 3.3 million shares under the ATM, respectively, resulting in net proceeds of approximately $12.3 million.

Preferred Stock Equity Offerings

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 accrued on the Series A Preferred Stock at the rate of 7% per year and was 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, was the base that was also used to determine the number of common shares into which the Series A Preferred Stock would have converted as well as the calculation of the 7% dividend. Each share of Series A Preferred Stock was 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.

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

The Series A Preferred Stock was initially convertible into 1,020,000 shares of common stock (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 beneficial conversion feature (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 payment-in-kind (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 indicated that each PIK dividend would accrete $0.5699 of BCF as an additional deemed dividend for every $2.7451 of PIK dividend accrued.

On April 8, 2021 and August 31, 2021, the holder of the Series A Preferred Shares converted 36,111 preferred shares into 4,228 common shares in total for the payment of PIK dividends.

Exchange of Outstanding Series A Convertible Preferred Stock for Common Shares

On October 29, 2021, the Company entered into an exchange agreement with General International Holdings, Inc., the holder of all of the outstanding Series A Preferred Stock, pursuant to which General International Holdings, Inc. delivered to the Company all of the outstanding Series A Preferred Stock in exchange for 262,910 shares of the Company’s common stock ($10 per share induced conversion price), without any cash payments by either party. The exchange 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.

The liquidation value of this preferred stock on the date of exchange to common shares was $2.6 million (including the accrued dividend of $0.8 million). To induce this exchange, the Company offered to exchange shares of common stock at a rate of $10 per share, compared to a conversion rate of $32.94 per share of common stock pursuant to the terms of the Series A Preferred Stock. This resulted in the total issuance of 262,910 shares of common stock upon the exchange, which included an additional 183,098 shares of common stock compared to the number of shares that would have been issuable upon conversion of all of the outstanding Series A Preferred Stock.

In accordance with ASC 470-20, the Company accounted for the exchange 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. This amount was presented in the accompanying consolidated statement of operations under the caption deemed dividend upon exchange of Series A and Series B Preferred Stock to common stock and shown as an adjustment to net loss, to arrive at net loss attributable to common stockholders.

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 accrued on the Series B Preferred Stock at the rate of 7% per year and would 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, was the base that was also used to determine the number of common shares into which the Series B Preferred Stock would convert as well as the calculation of the 7% dividend. Each share of Series B Preferred Stock was 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.

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 (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 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 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 indicated that each PIK dividend would accrete 0.84 of BCF as an additional deemed dividend for every $1.50 of PIK dividend accrued.

Exchange of Outstanding Series B Convertible Preferred Stock for Common Shares

On December 3, 2021, the Company entered into a series of Exchange Agreements with all of the holders of the Company’s Series B convertible preferred stock.

Pursuant to the Exchange Agreements, the holders exchanged 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 (the “Exchange”). 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. This Exchange 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.

The liquidation value of this Series B Preferred Stock on the date of exchange to common shares was $5.2 million (including the accrued dividend of $1.2 million). To induce this exchange, the Company offered to exchange shares of common stock at a rate of the greater of $10 per share or 85% of the most recent closing price for the common stock on the Nasdaq Capital Market, compared to a conversion rate of $18 per share of common stock pursuant to the terms of the Series B Preferred Stock. This resulted in the total issuance of 522,244 shares of common stock upon conversion, which included an additional 232,111 shares of common stock compared to the number of shares that would have been issuable upon conversion of all of the outstanding Series B Preferred Stock.

In accordance with ASC 470-20, the Company accounted for the exchange 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 exchange. Pursuant to this accounting guidance, 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. The deemed dividend was presented in the accompanying consolidated statement of operations under the caption deemed dividend upon exchange of Series A and Series B Preferred Stock to common stock and shown as an adjustment to net loss, to arrive at net loss attributable to common stockholders.

Warrants

The Company’s outstanding warrants at December 31, 2021 and 2020 are below. These warrants are classified within equity on the consolidated balance sheets.

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 year ended December 31, 2021, the Company issued 58,164 stock options to consultants. The 2021 options issued to the consultants of the Company were assigned fair values ranging from $2.08 per share to $4.75 per share (total fair value of $150,000). The value was determined using Black-Scholes pricing model. The following assumptions were used in the Black-Scholes pricing model:

Stock option transactions to the employees, directors and consultants are summarized as follows for the year ended December 31, 2021:

During the year ended December 31, 2021, the Company received approximately $0.3 million of net proceeds from the exercise of 30,282 stock options.

Stock option transactions to the employees, directors and consultants are summarized as follows for the year ended December 31, 2020:

A summary of the status of the Company’s non-vested options as of December 31, 2021 and December 31, 2020, and changes during the year ended December 31, 2020 and the year ended December 31, 2021, is presented below:

The above tables include stock options issued and outstanding as of December 31, 2021 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, with remaining contractual lives of 3.3 years to 7.9 years. All other options issued to directors, officers, and employees have a remaining contractual life ranging from 3.3 years to 7.9 years.

ii. A total of 198,858 non-qualified 1 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 0.2 years to 9.7 years.

As of December 31, 2021, there was approximately $42,000 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 2.06 years. For stock options outstanding at December 31, 2021 and 2020, the intrinsic value was approximately $238,000 and $33,000, respectively. For those vested stock options at December 31, 2021 and 2020, the intrinsic value was approximately $225,000 and $33,000, respectively.

The following table provides certain information with respect to the above-referenced stock options that were outstanding and exercisable at December 31, 2021:

Common Share Issuances

2021

For the year ended December 31, 2021, the Company issued 10,462 common shares to its investor relations firm for services provided during the year ended December 31, 2021.

On November 18, 2021, the Board of Directors approved an equity grant of $35,000 to each director, which equaled to a total of 19,644 shares of common stock issued to the six directors, valued on the grant date at $10.69 per share. There were 13,096 common shares issued to four directors that vested immediately upon issuance and the remaining 6,548 shares of common shares were issued to the two remaining directors that vested on January 1, 2022.

2020

During the year ended December 31, 2020, the Company issued 4,000 common shares to its investor relations firm.

On October 28, 2020, the Board of Directors approved a grant of a total of 21,200 shares of common stock to the Company’s four directors. The Company filed a Form S-8 with the SEC, to register the underlying shares of the 2020 Plan on March 25, 2021. All of these common shares were issued on March 31, 2021 and vested immediately upon issuance.

RSUs Issued and Net Share Settlements for Payments of Withholding Taxes

On October 28, 2020, the Compensation Committee of the Board granted from the 2020 Plan time-based RSUs to certain of the Company’s executive officers, employees, and consultants. Each RSU represents a contingent right to receive, upon vesting, one share of the Company’s common stock. The number of RSUs granted to executive officers, employees and consultants totaled 243,800 shares. These RSUs awards vest in three equal instalments on each of the first three annual anniversaries of the grant date, on October 28, 2021, October 28, 2022 and October 28, 2023.

On October 28, 2021, the first tranche of 78,617 of total outstanding RSUs vested. Regarding these 78,617 RSUs that vested, the Company withheld 35,304 common shares of the employees at the stock price on the vesting date of $9.93 per share, in order to make payments of withholding taxes of $0.3 million on these vested shares. The Company issued a total of 43,313 shares of common stock, net of the share settlement for the taxes paid upon the vesting of these RSUs, to its employees and one consultant.

On November 4, 2021, the Compensation Committee of the Board of Directors approved the accelerated vesting of the remaining 157,233 RSUs outstanding, and all these remaining 157,233 RSUs vested on December 15, 2021. Regarding these 157,233 RSUs vested on December 15, 2021, the Company withheld 70,265 common shares to be issued to the employees, at the stock price on the vesting date 6.74 per share in order to make the payments for withholding taxes of $0.5 million on these vested shares. The Company issued a total of 86,968 shares of common stock, net of share settlement for the taxes paid upon vesting of RSUs, to its employees and one consultant. Total payments for withholding taxes on the net share settlements of vested RSU equity awards for the year ended December 31, 2021 was $0.8 million.

For the remaining 157,233 RSUs where the vesting was accelerated on December 15, 2021, the remaining unamortized compensation expense amount of $0.4 million was expensed on this date.

Restricted Stock Units Outstanding

The following summarizes the Company’s RSUs activity:

Restricted Stock Awards

On November 18, 2021, the Board of Directors approved an equity grant of approximately $2 million, which equaled to a total of 188,588 RSAs, to all of its employees and two consultants, valued at the stock price on the grant date of $10.69 per share. These RSAs awards contained 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 December 31, 2021, the Company had deemed it not probable that the performance-based vesting provision would be met. Therefore these 188,588 shares were included in the total outstanding common shares at December 31, 2021 and compensation expense recognized straight line over the three-year vesting period. A total of $0.1 million of compensation expense was recorded for the year ended December 31, 2021.

There was an additional performance-based RSA grant of approximately $2 million, which equaled a total 188,588 shares, with immediate vesting upon the Company completing a business acquisition in 2022, with the target’s historical financials meeting certain financial performance metrics. This RSA grant, based on managements’ probability assessment of meeting this milestone at December 31, 2021, was not probable of being met and no expense was recorded as stock-based compensation for the year ended December 31, 2021. These 188,588 common shares were not included in the total outstanding common shares at December 31, 2021, on the accompanying balance sheet and statement of stockholders’ equity. 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 RSA shares in the total outstanding common shares, if there is a change to its assessment that it is probable that this performance-condition will be met.

The following summarizes the Company’s RSAs activity:

Scheduled vesting for outstanding RSAs with service conditions at December 31, 2021 is as follows:

As of December 31, 2021, there was approximately $1.9 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 consolidated statements of operations for the years ended December 31, 2021 and 2020 are as follows (rounded in millions):