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STOCKHOLDERS’ EQUITY
 9 Months Ended
Sep. 30, 2023
Equity [Abstract]  
STOCKHOLDERS’ EQUITY

 

11. STOCKHOLDERS’ EQUITY

 

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, but in any event, 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 the Company issued B. Riley 10,484 shares of its common stock in both September 2022 and April 2023.

 

The Company incurred an aggregate cost of approximately $0.5 million in connection with the Purchase Agreement, including the fair value of the shares of common stock issued to B. Riley, which were recorded as equity on the Balance Sheet and offset proceeds from the sale of the Company’s common stock under the Purchase Agreement.

 

During the nine months ended September 30, 2023, the Company issued 198,033 shares under the Purchase Agreement for $2.5 million in proceeds, of which $0.5 million was offset by the offering costs.

 

Stock Issued For Services

 

During the nine months ended September 30, 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 and recognized over the service period which ended in the third quarter of 2023. 

 

Stock Options

 

Option activity for the nine months ended September 30, 2023 is as follows:

            
   Number of Options   Weighted Average Exercise Price   Weighted Average Remaining Contractual Life 
Outstanding at December 31, 2022   336,758    12.54      
Granted   46,000    12.07      
Exercised   –    –      
Forfeited   (19,160)   19.21      
Outstanding at September 30, 2023   363,598   $12.13    6.60 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 paid during the life of the options granted during the nine months ended September 30, 2023 and 2022:

 
  Nine months ended
  September 30, 2023
Expected volatility 90.2% - 94.5%
Expected term 6.5 - 7 Years
Risk-free interest rate 3.55% - 4.47%
Weighted-average FV $9.71

 

The Company’s stock option compensation expense was $0.1 million and $0.4 million for the three and nine months ended September 30, 2023 respectively, and $0.1 million and $0.3 million for each of the three and nine months ended September 30, 2022. There was $1.0 million of total unrecognized compensation costs related to outstanding stock options at September 30, 2023 which will be recognized over 4.0 years. Total intrinsic value of options outstanding and options exercisable were $0.2 million and $0.2 million, respectively, as of September 30, 2023. The number of shares of common stock underlying stock options vested and unvested as of September 30, 2023 were 278,182 and 85,416, 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 nine months ended September 30, 2023. 142,500 PSUs and 71,250 RSUs remain outstanding as of September 30, 2023, with weighted-average grant-date fair values of $13.05 each.

 

Stock compensation expense related to the RSUs and PSUs was $0.9 million during the nine months ended September 30, 2023, with $1.7 million in unrecognized stock compensation expense remaining to be recognized over 1.4 years as of September 30, 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 previously issued restricted stock awards 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 nine months ended September 30, 2023 is as follows:

      Weighted- 
   Nonvested   Average Grant- 
   Shares   Date Fair Value 
Nonvested at December 31, 2022   17,865   $14.11 
Granted   18,375    11.40 
Vested   (23,765)   13.12 
Forfeited   (5,400)   11.40 
Nonvested at September 30, 2023   7,075   $13.84 

 

Stock compensation expense related to restricted stock awards was $0.3 million during each of the nine months ended September 30, 2023 and 2022.

 

During the quarter ended September 30, 2023, 5,400 shares were forfeited from the escrow account as a result of the departure of a board member. As of September 30, 2023, there were unreleased shares of common stock representing $0.1 million of unrecognized restricted stock grant expense which will be recognized over 1.25 years.

 

Warrants

 

During the nine months ended September 30, 2023, the Company issued warrants to purchase up to 200,000 shares of the Company’s common stock at a price per share equal to $17.00 to a consultant for investor relations services to be provided over a five-year period. The warrants 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. During the nine months ended September 30, 2023, $0.1 million was recorded as expense and at September 30, 2023, $1.1 million of cost has not been recognized and will be recognized over the next 4.50 years.

 

A summary of activity of warrants outstanding for the nine months ended September 30, 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   (21,809)   6.30 
Outstanding at September 30, 2023   618,395   $9.76 
Exercisable at September 30, 2023   618,395   $9.76 

 

Exercisable warrants as of September 30, 2023 have a weighted average remaining contractual life of 1.83 years. The intrinsic value of the exercisable shares of the warrants at September 30, 2023 was $0.5 million.