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STOCKHOLDERS’ EQUITY
 3 Months Ended
Mar. 31, 2023
Equity [Abstract]  
STOCKHOLDERS’ EQUITY

 

11. STOCKHOLDERS’ EQUITY

 

Stock Issued For Services

 

During the three months ended March 31, 2023, the Company issued 6,444 shares of its common stock in exchange for marketing services to be provided over a six-month period. The fair value of such stock issued is $0.1 million and was recorded to prepaid expenses and other current assets upon issuance to be recognized over the service period.

 

Committed Equity Facility

 

On September 2, 2022, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with B. Riley. Pursuant to the Purchase Agreement, the Company has the right, in its sole discretion, to sell to B. Riley up to $30.0 million, or a maximum of 2.0 million shares of the Company’s common stock at 97% of the volume weighted average price (“VWAP”) of the Company’s common stock on the trading day, calculated in accordance with the Purchase Agreement, over a period of 24 months subject to certain limitations and conditions contained in the Purchase Agreement. Sales and timing of any sales are solely at the election of the Company, and the Company is under no obligation to sell any common stock to B. Riley under the Purchase Agreement. As consideration for B. Riley’s commitment to purchase shares of the Company’s common stock, in September 2022, the Company issued B. Riley 10,484 shares of its common stock and will issue an additional 10,484 shares of its common stock or a cash payment of $150,000, at the Company’s sole discretion, sometime after the first VWAP purchase occurs.

 

The Company incurred an aggregate cost of approximately $0.5 million in connection with the Purchase Agreement, including the fair value of the 10,484 shares of common stock issued to B. Riley upon the execution of the agreement and the additional comment shares of 10,484, which was recorded to prepaid expenses and other current assets on the Balance Sheet to be offset against future proceeds from the sale of the Company’s common stock under the Purchase Agreement.

 

During the three months ended March 31, 2023, the Company issued 37,741 shares under this agreement for $0.7 million in proceeds, of which $0.5 million was offset by the offering costs.

 

Stock Options

 

Option activity for the three months ended March 31, 2023 is as follows:

             
       Weighted   Weighted
       Average   Average
   Number of   Exercise   Remaining
   Options   Price   Contractual Life
Outstanding at December 31, 2022   336,758    12.54    
Granted   10,000    17.55    
Outstanding at March 31, 2023   346,758   $12.68   6.88 Years

 

The fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model using the assumptions in the table below and we assumed there would not be dividends granted for the options granted during the three months ended March 31, 2023 and 2022:

 

   Three months ended March 31, 
   2023   2022 
Expected Volatility   95%    97.40% - 97.41% 
Expected Term   7 Years    7 Years 
Risk-free interest rate   3.55%    1.55% - 1.71% 
Weighted-average FV  $14.28   $14.31 

 

The Company’s stock option compensation expense was $0.1 million for each of the three months ended March 31, 2023 and 2022, and there was $1.2 million of total unrecognized compensation costs related to outstanding stock options at March 31, 2023 which will be recognized over 3.7 years. Total intrinsic value of options outstanding and options exercisable were $2.0 million and $1.7 million, respectively, as of March 31, 2023. The number of stock options vested and unvested as of March 31, 2023 were 267,975 and 69,296, respectively.

 

Restricted Stock Units

 

In November 2022, the Company granted 142,500 restricted stock units (“RSUs”) and up to 142,500 performance stock units (“PSU”) to its Chief Executive Officer (“CEO”). 50% of the RSUs vested upon grant, with 25% vesting on February 1st of 2024 and 2025. The number of shares that will be earned under the PSUs will be determined based on the achievement of specific performance metrics during the three-years ending December 31, 2024.

 

There was no activity during the three months ended March 31, 2023. 142,500 PSUs and 71,250 RSUs remained outstanding as of March 31, 2023, with weighted-average grant-date fair values of $13.05 each.

 

Stock compensation expense related to the RSUs and PSUs was $0.3 million during the three months ended March 31, 2023, with $2.3 million in unrecognized stock compensation expense remaining to be recognized over 1.9 years as of March 31, 2023.

 

Restricted Stock Awards

 

The Company issues restricted stock to the members of its board of directors as compensation for such members’ services. Such grants generally vest ratably over four quarters. The Company also issues restricted stock to its CEO, for which generally 50% of the shares granted vest ratably over four quarters and the remaining 50% vest ratably over twelve quarters. The common stock related to these awards are issued to an escrow account on the date of grant and released to the grantee upon vesting. The fair value is determined based on the closing stock price of the Company’s common stock on the date granted and the related expense is recognized ratably over the vesting period.

 

A summary of activity of the restricted stock awards for the three months ended March 31, 2023 is as follows:

          
       Weighted- 
   Nonvested   Average Grant- 
   Shares   Date Fair Value 
Nonvested at December 31, 2022   17,865   $14.11 
Vested   (5,966)   12.75 
Nonvested at March 31, 2023   11,899   $14.79 

 

Stock compensation expense related to restricted stock awards was $0.1 million during each of the three months ended March 31, 2023 and 2022.

 

As of March 31, 2023, there were unreleased shares of common stock representing $0.2 million of unrecognized restricted stock grant expense which will be recognized over 1.75 years.

  

Warrants

 

During the three months ended March 31, 2023, the Company issued 200,000 warrants with a $17.00 strike price to purchase the Company’s common stock for investor relations services to be provided over a five-year period. The awards are immediately exercisable but are subject to repurchase by the Company until the required service is provided. The fair value of such warrants was $8.05 per share or $1.6 million on the date of grant using the Black-Scholes option-pricing model. This model incorporated certain assumptions for inputs including a risk-free market interest rate of 3.86%, expected dividend yield of the underlying common stock of 0%, expected life of 2.5 years and expected volatility in the market value of the underlying common stock based on our historical volatility of 99.6%. The fair value of the warrants was recorded to prepaid expenses and other current assets to be recognized over the service period. At March 31, 2022, $1.6 million of cost has not been recognized and will be recognized over the next 5.0 years.

 

A summary of activity of warrants outstanding for the three months ended March 31, 2023 is as follows: 

          
   Number of Warrants   Weighted Average Exercise Price 
Outstanding at December 31, 2022   440,204   $9.73 
Granted   200,000   $17.00 
Exercised   (15,898)  $6.30 
Outstanding at March 31, 2023   624,306   $9.73 
Exercisable at March 31, 2023   424,306   $6.30 

 

Exercisable warrants as of March 31, 2023 have a weighted average remaining contractual life of 1.05 years. The intrinsic value of the exercisable shares of the warrants at March 31, 2023 was $4.1 million.