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Stockholders Equity and StockBased Compensation
 3 Months Ended
Mar. 31, 2025
Stockholders Equity and StockBased Compensation  
Stockholders' Equity and Stock-Based Compensation

Note 7. Stockholders’ Equity and Stock-Based Compensation

 

At March 31, 2025, the Company had 21,557,343 common shares outstanding (including outstanding restricted stock awards (RSAs) totaling 743,702 shares). Also outstanding were stock options relating to 429,454 shares of common stock (of which 409,789 stock options were vested), all totaling 21,986,797 shares of common stock and all common stock equivalents, outstanding as of March 31, 2025.

 

At December 31, 2024, the Company had 18,783,912 common shares outstanding (including outstanding RSAs totaling 781,864 shares). Also outstanding were stock options relating to 464,940 shares of common stock (of which 445,275 stock options were vested), all totaling 19,248,852 shares of common stock and all common stock equivalents, outstanding as of December 31, 2024.

 

Issuance of Series X Preferred Stock 

 

On February 27, 2025, the Company entered into a Subscription and Investment Representation Agreement with the chair of the Audit Committee and an independent member of the Board (the “Purchaser”), pursuant to which the Company agreed to issue and sell one (1) share of the Company’s Series X Preferred Stock, par value $0.001 per share (the “Series X Preferred Stock”), to the Purchaser for $100 in cash. The sale closed on February 27, 2025 and the $100 was fully paid-up and recorded under current liabilities. The Company will redeem the Series X Preferred Stock for $100 cash after the Company’s annual 2025 shareholder meeting (the “Annual Meeting”).

 

The Series X Preferred Stock does not have any voting rights except with respect to any proposal to increase the number of authorized shares of common stock of the Company. Each share of Series X Preferred Stock will be entitled to 25,000,000 votes on such proposal, voting together with the holders of the Company’s common stock. The votes by the holder of Series X Preferred Stock will be cast at the Annual Meeting automatically in the same “mirrored” proportion as the aggregate votes cast “for” and “against” the proposal by the holders of the common stock who vote on such proposal (excluding abstentions, broker non-votes and shares of common stock that are not voted “for” or “against” such proposal). The voting power attributable to the Series X Preferred Stock will be disregarded for purposes of determining whether a quorum is present at the Annual Meeting.

 

Pursuant to the terms of issuance, the Series X Preferred Stock will be redeemed at its original issuance price of $100 upon the earlier of (i) the order of the Board of Directors in its sole discretion, automatically and effective at such date and time as determined and specified by the Board of Directors in its sole discretion and (ii) automatically and effective immediately after the publishing or other public announcement by the Company of the final results of any stockholder vote on a proposal to increase the authorized common stock.

 

Common Stock Equity Offerings

 

Increase in Authorized Common Shares

 

On February 26, 2025, the Company’s Board of Directors approved increasing the authorized common shares from 25,000,000 shares to 100,000,000 shares. This change will take effect upon receiving majority shareholder approval at the 2025 shareholder annual meeting on May 8, 2025 and filing the amendment to the Company’s Articles of Incorporation with the Nevada Secretary of State (note 9).

 

At-the-Market (ATM) Offerings

 

On May 28, 2019, the Company entered into an at-the-market equity offering sales agreement with Stifel, Nicolaus & Company, Incorporated (Stifel), which was amended on April 9, 2021 and May 8, 2024 (the ATM Agreement), 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 amended agreement, the Company pays Stifel a commission equal to 3.0% 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.

 

The Company filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission (SEC) on March 29, 2024, registering the sale of up to $75.0 million of the Company’s securities that was declared effective on April 19, 2024. On May 10, 2024, the Company filed a prospectus supplement, which was further supplemented on July 19, 2024 and August 9, 2024 (collectively, the “First Prospectus Supplement”), pursuant to which the Company may offer and sell shares of common stock having an aggregate offering price of up to $12.6 million from time to time through the ATM. The Company exhausted all sales under the First Prospectus Supplement. On November 22, 2024, the Company filed a prospectus supplement pursuant to which the Company may offer and sell shares of common stock having an aggregate offering price of up to $45.0 million from time to time through the ATM.

 

The Company records its ATM sales on a settlement date basis. The Company sold 2,605,619 shares under the ATM for the three months ended March 31, 2025 resulting in net proceeds of $20.2 million (stock issuance costs were approximately $0.7 million). The Company records its ATM sales on a settlement date basis. The Company sold 427,300 shares under the ATM for the three months ended March 31, 2024 resulting in net proceeds of $1.2 million (stock issuance costs were approximately $0.2 million).

 

Stock-Based Compensation

 

 2020 Omnibus Incentive Plan

 

On March 9, 2020, the Board of Directors adopted the Company’s 2020 Omnibus Incentive Plan (as subsequently amended, 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 Awards and Restricted Stock Units, and (d) Other Stock-Based and Cash-Based Awards.

 

On February 27, 2024, the Board of Directors approved an increase of 700,000 shares to the authorized number of shares under the 2020 Plan, increasing the total authorized number of shares from 1,800,000 shares to 2,500,000 shares. This increase was approved by the stockholders at the shareholders’ annual meeting on April 19, 2024.

 

The total number of shares of common stock available for issuance under the 2020 Plan was 2,500,000 shares with 1,009,389 shares available for future issuance at March 31, 2025.

 

On February 26, 2025, the Company’s Board of Directors approved an increase of 2,500,000 shares to the authorized number of shares under the 2020 Plan, increasing the total authorized number of shares from 2,500,000 to 5,000,000. This change will take effect if approved by shareholders at the Company’s 2025 shareholder annual meeting on May 8, 2025 (note 9).

 

Stock Options

 

Stock options issued to the Company’s employees, directors and consultants are summarized as follows for the three months ended March 31, 2025 and 2024:

 

 

 

Number of

Options

 

 

Weighted Average Exercise Price

 

 

Weighted-Average

Remaining

Contractual

Term (Years)

 

 

Aggregate

Intrinsic

Value

 

Outstanding, December 31, 2024

 

 

464,940

 

 

$16.24

 

 

 

3.07

 

 

$184,818

 

Granted

 

 

10,448

 

 

 

9.42

 

 

 

 

 

 

 

—

 

Exercised

 

 

(45,934 )

 

 

4.80

 

 

 

 

 

 

 

310,093

 

Forfeited

 

 

—

 

 

 

—

 

 

 

 

 

 

 

—

 

Expired

 

 

—

 

 

 

—

 

 

 

 

 

 

 

—

 

Outstanding, March 31, 2025

 

 

429,454

 

 

$17.29

 

 

 

2.53

 

 

 

469,719

 

Vested and expected to vest, end of the period

 

 

429,454

 

 

$17.29

 

 

 

2.53

 

 

 

469,719

 

Options exercisable, end of the period

 

 

409,789

 

 

$17.97

 

 

 

2.22

 

 

$387,153

 

 

In the three months ended March 31, 2025 and 2024, the Company issued 10,448 and 58,309 stock options, respectively, to one consultant. The 10,448 stock options and the 58,309 stock options were assigned a fair value of $5.74 per share and $1.03 per share, respectively (total fair value of $60,000 for each grant). The weighted-average grant-date exercise price per share of the stock options granted for the three months ended March 31, 2025 and 2024, was $9.42 and $2.62, respectively.

 

The fair value was determined using the Black-Scholes pricing model. For expected volatility, the Company concluded that the historical volatility over the option’s expected holding term provided the most reasonable basis for this estimate. For the risk-free interest rate, the Company used U.S. Treasury Note rates, which mature at approximately the same time as the option’s expected holding term or option life determined by using the simplified method. The Company recognized forfeitures of equity-based awards as a reduction to compensation costs in the period in which they occur.

 

The following assumptions were used in the Black-Scholes pricing model to determine the fair value of stock options granted for the three months ended March 31, 2025 and 2024:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2025

 

 

2024

 

Expected volatility

 

 

117.44%

 

 

75.36%

Risk free interest rate

 

 

3.95%

 

 

4.54%

Dividend yield rate

 

 

—

 

 

 

—

 

Expected life

 

2 years

 

 

2 years

 

Closing price per share - common stock

 

$9.42

 

 

$2.62

 

 

The intrinsic value is calculated as the difference between the fair value of the Company’s common stock and the exercise price of the stock options. The fair value of the Company’s common stock was $7.46 per share and $2.95 per share at March 31, 2025 and 2024, respectively. As of March 31, 2025, total unrecognized compensation cost related to option awards was $35,388, which is expected to be recognized over a remaining weighted-average vesting period of 1.9 years. As of March 31, 2024, total unrecognized compensation cost related to option awards was $35,384, which is expected to be recognized over a remaining weighted-average vesting period of 1.9 years.

 

Exercise of Options

 

For the three months ended March 31, 2025, the Company received approximately $0.2 million of net proceeds from the exercise of 45,934 stock options from employees and consultants.

 

Common Stock

 

Consultants’ Stock Issuances

 

For the three months ended March 31, 2025 and 2024, the Company issued 3,171 shares (with stock prices of $4.73 per share) and 3,750 shares (with stock prices of $4.00 per share) of common stock, respectively, to its investor relations firm for services provided during the period, recorded to general and administrative expenses. These shares vested immediately upon issuance. The expense recorded for these share issuances was $15,000 for each quarter. The shares were valued based on the closing market price of the Company’s common stock on the date of grant.

 

On August 19, 2024, the Board of Directors approved an equity grant valued at $180,000 to a consulting and investment research firm, for corporate advisory services to be provided over a twelve-month period, and preparation and dissemination of a report regarding the Company, which resulted in issuing the consultant 71,713 shares of common stock on the grant date, valued at $2.51 per share. These shares vested immediately upon issuance and are not forfeitable. The compensation cost of $180,000 began to be recognized on a straight-line basis over the requisite service period. Approximately $45,000 and $0 were recorded as consulting expenses for the three months ended March 31, 2025, and 2024, respectively.

 

As of March 31, 2025, the unrecognized compensation cost of approximately $69,000 was recorded under prepaid expenses and other current assets on the accompanying condensed consolidated balance sheet, which is expected to be recognized over a remaining service period of 0.4 years.

 

Director Compensation - Equity-Settled Awards 

 

On December 4, 2024, the Board of Directors approved an equity grant valued at $500,000 in total to its five directors for the service period and year ended December 31, 2024, which resulted in granting a total of 85,915 shares of common stock, valued on the grant date at $5.82 per share on December 4, 2024, which shares vested on January 2, 2025.

 

On November 20, 2023, the Board of Directors approved an equity grant valued at $240,000 in total to its six directors for the service period and year ended December 31, 2023, which resulted in granting a total of 60,456 shares of common stock, valued on the grant date at $3.97 per share on November 20, 2023, which shares vested on January 2, 2024.

 

As a result, the fair value of the stock awards was measured on the grant date and recorded as an increase to stock-based compensation expense and additional paid-in capital in 2025 and 2024. The fair value of the shares granted was determined based on the closing market price of the Company’s common stock on the grant date.

 

Restricted Stock Awards

 

The following summarizes the Company’s restricted stock award activity and the RSA outstanding:

 

 

 

Number of

Shares

 

 

Weighted-

Average

Grant Date

Fair Value

 

 

Aggregate

Fair

Value

 

Outstanding, December 31, 2024

 

 

781,864

 

 

$5.19

 

 

$3,698,217

 

Awards granted

 

 

57,940

 

 

 

8.63

 

 

 

500,022

 

Awards vested

 

 

(96,102)

 

 

5.67

 

 

 

737,535

 

Awards forfeited

 

 

—

 

 

 

—

 

 

 

—

 

Outstanding, March 31, 2025

 

 

743,702

 

 

$5.40

 

 

$

 5,548,017

 

 

On March 12, 2025, the Board of Directors approved a grant of restricted stock awards (RSAs) totaling $0.5 million to its five directors for the service year ending December 31, 2025. This grant comprised 57,940 RSAs, valued at $8.63 per share on the grant date, with vesting scheduled in four quarterly installments. The first installment, consisting of 14,485 RSAs, vested on March 31, 2025. This resulted in the recognition of $0.1 million in stock-based compensation expense for the quarter ended March 31, 2025.

 

The aggregate fair value was calculated as the fair value of the Company’s common stock. The fair value of the Company’s common stock was $7.46 and $2.95 per share at March 31, 2025 and 2024, respectively. The fair value of the RSAs vested for the three months ended March 31, 2025 and 2024 was $0.7 million and $0 million, respectively.

 

As of March 31, 2025, all the outstanding shares of RSAs are unvested. As of March 31, 2025, total unrecognized compensation cost related to RSAs was $3.5 million, which is expected to be recognized over a remaining weighted-average vesting period of 2.14 years.

 

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

 

On March 24, 2025, the Company entered into a separation agreement with a former employee. As part of the agreement, the Board of Directors approved the accelerated vesting of 70,710 RSAs, which would have otherwise been forfeited upon termination. In accordance with ASC 718, this was treated as a modification, leading to the recognition of $0.5 million in stock-based compensation expense for the quarter ended March 31, 2025. This expense included $0.2 million of previously unrecognized compensation cost and $0.3 million of incremental fair value from the modification of the RSAs awarded.

 

To satisfy approximately $0.2 million in payroll withholding taxes associated with the accelerated RSAs vesting, the Company withheld 21,285 shares, resulting in the issuance of 49,425 net shares to the former employee. These withheld shares were returned to the 2020 Plan share reserve for potential future issuance.

 

On March 14, 2025, 10,907 RSAs vested to the former employee based on his service to the Company. To satisfy approximately $36,000 in payroll withholding taxes, the Company withheld 3,863 shares, resulting in the issuance of 7,044 net shares to the former employee. These withheld shares were returned to the 2020 Plan share reserve for potential future issuance.

 

RSA Summary - 2025 and 2024

 

As of March 31, 2025 and December 31, 2024, there were 743,702 shares and 781,864 shares of RSAs included in the total issued and outstanding common stock, respectively. Compensation expense for RSAs issued to employees and consultants are generally recognized straight line over the three-year vesting period. A total of $1.3 million (including the $0.5 million accelerated RSAs vesting for the former employee) and $0.4 million of stock-based compensation expense was recorded for the three months ended March 31, 2025 and 2024, respectively, for the RSAs.

 

Stock-Based Compensation Expense

 

Total non-cash stock-based compensation expense recorded related to options granted and restricted stock awards included in the Company’s unaudited condensed consolidated statements of operations for the three months ended March 31, 2025 and 2024 are as follows (rounded in millions):

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2025

 

 

2024

 

Research and development expenses

 

$0.2

 

 

$0.1

 

General and administrative expenses

 

 

1.1

 

 

 

0.4

 

Total stock-based compensation expense

 

$1.3

 

 

$0.5