Note 8. Stockholders’ Equity and Stock-Based Compensation

On October 27, 2022, 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 13,500,000 shares to 25,000,000 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 650,000 shares to 1,100,000 shares.

At December 31, 2022, the Company had 11,900,217 common shares outstanding (including outstanding restricted stock awards totaling 416,316 shares). Also outstanding were stock options relating to 525,903 shares of common stock, all totaling 12,426,120 shares of common stock and all common stock equivalents, outstanding at December 31, 2022.

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.

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. Under this agreement, the Company pays Stifel a commission equal to 4.0% of the aggregate gross proceeds of any sales of common stock under the agreement. The offering of common stock pursuant to this agreement can be terminated with 10 days written notice by either party. 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 filed another prospectus supplement, dated November 9, 2022, with the SEC pursuant to which it may offer and sell shares of common stock having an aggregate offering price of up to $20.0 million from time to time, through the ATM.

The Company records its ATM sales on a settlement date basis. The Company sold approximately 1.9 million shares, under the ATM for the year ended December 31, 2022 resulting in net proceeds of approximately $11.0 million. 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.

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 December 31, 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 year ended December 31, 2022, the Company issued 18,852 stock options to two consultants. These options were assigned a weighted average fair value of $3.98 per share (total fair value of $75,000). 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 a weighted average fair value of $2.58 per share (total fair value of $150,000). The value was determined using the Black-Scholes pricing model. The following assumptions were used in the Black-Scholes pricing model:

Stock options issued to the Company’s employees, directors and consultants are summarized as follows for the year ended December 31, 2022:

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.

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

The above tables include stock options issued and outstanding as of December 31, 2022 as follows:

i. A total of 325,571 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 2.27 years to 6.92 years. All other options issued to directors, officers, and employees have a remaining contractual life ranging from 2.27 years to 6.92 years.

ii. A total of 200,332 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 0.36 years to 9.67 years.

As of December 31, 2022, 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, 2022 and 2021, the intrinsic value was approximately $5,000 and $238,000, respectively. For those vested stock options at December 31, 2022 and 2021, the intrinsic value was approximately $5,000 and $225,000, respectively.

The following table provides certain information with respect to the above-referenced stock options that were outstanding and exercisable at December 31, 2022:

 Common Share Issuances

2022

For the year ended December 31, 2022, the Company issued 10,565 common shares, respectively, to its investor relations firm for services provided during the year ended December 31, 2022.

On December 15, 2022, the Board of Directors approved an equity grant of $200,000 in total to its five directors, which equaled to a total of 52,085 shares of common stock issued to the five directors, valued on the grant date at $3.84 per share and issued on January 3, 2023. As of December 31, 2022, the Company accrued these directors’ fees of $200,000 under accrued directors’ fees.

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 $210,000 in total to its six directors, 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.

Restricted Stock Units 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 restricted stock units (‘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 installments 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.

Restricted Stock Units Outstanding

The following summarizes the Company’s RSUs activity:

Restricted Stock Awards Issued and Net Share Settlements for Payments of Withholding Taxes

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. The Company did not meet the performance-based vesting provision. Therefore, these RSAs awards vest in three equal installments on each of the first three annual anniversaries of the grant date, on November 18, 2022, November 18, 2023 and November 18, 2024. There was an additional performance-based RSA grant on November 18, 2021 of approximately $2 million, which equaled to a total 188,588 shares, with vesting only upon the Company completing a business acquisition in 2022, with the target’s historical financials meeting certain financial performance metrics. The Company did not meet this milestone and these 188,588 RSAs expired at December 31, 2022 and were returned back to the stock plan.

On November 18, 2022, the first tranche, or 62,862. of the total outstanding RSAs vested. Regarding these 62,862 RSAs that vested, the Company withheld 21,794 common shares of the employees at the stock price on the vesting date of $4.80 per share, in order to make payments of withholding taxes of $0.1 million on these vested shares. The Company issued a total of 41,068 shares of common stock, net of the share settlement for the taxes paid upon the vesting of these RSAs, to its employees and consultants.

On December 15, 2022, the Board of Directors approved an equity grant of approximately $1.4 million, which equaled to a total of 290,590 RSAs, to all of its employees and two consultants, valued at the stock price on the grant date of $4.71 per share. These RSAs awards vest in three equal installments on each of the first three annual anniversaries of the grant date, on December 15, 2023, December 15, 2024 and December 15, 2025.

As of December 31, 2022 and 2021, there were 416,316 RSAs and 188,588 RSAs included in the total outstanding common shares, respectively and compensation expense recognized straight line over the three-year vesting period. A total of $0.7 million and $0.1 million of compensation expense were recorded for the year ended December 31, 2022 and 2021, respectively.

The following summarizes the Company’s RSAs activity:

Scheduled vesting for outstanding RSAs with service conditions at December 31, 2022 is as follows:

As of December 31, 2022, there was approximately $2.6 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 and the total unrecognized compensation is expected to be recognized over a weighted-average period of 2.43 years.

The components of total stock-based compensation expense included in the Company’s consolidated statements of operations for the years ended December 31, 2022 and 2021 are as follows (rounded in millions):