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STOCKHOLDERS’ EQUITY
 3 Months Ended
Mar. 31, 2024
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 of the Company’s common stock, as 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.

 

The Company has issued 199,469 shares under the Purchase Agreement for $2.5 million in proceeds, of which $0.5 million was offset by the offering costs as of March 31, 2024.

 

Stock Options

 

Option activity for the three months ended March 31, 2024 is as follows: 

          
       Weighted 
       Average 
   Number of   Exercise 
   Options   Price 
Outstanding at December 31, 2023   481,858   $10.41 
Granted   113,000    6.10 
Forfeited   (2,200)   10.74 
Outstanding at March 31, 2024   592,658   $8.48 

 

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 three months ended March 31, 2024 and 2023: 

       
    Three months ended March 31,
    2024   2023
Expected volatility   90.28% - 90.37%   94.51%
Expected term   7 Years   7 Years
Risk-free interest rate   4.01% - 4.25%   3.55%
Weighted-average FV   $4.88   $14.28

 

The Company’s stock option compensation expense was $0.2 million for the three months ended March 31, 2024, and $0.1 million for the three months ended March 31, 2023. There was $1.6 million of total unrecognized compensation costs related to outstanding stock options at March 31, 2024 which will be recognized over 3.0 years. Total intrinsic value of options outstanding and options exercisable were $0.4 million and $0.2 million, respectively, as of March 31, 2024. The number of shares of common stock underlying stock options vested and unvested as of March 31, 2024 were 351,788 and 240,870, 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”). For the RSUs, 50% vested upon the grant date, 25% vested on February 1, 2024 and 25% will vest on February 1, 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, 2024. 142,500 PSUs and 71,250 RSUs remain outstanding as of March 31, 2024, 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, 2024, with $1.1 million in unrecognized stock compensation expense remaining to be recognized over 1.0 years as of March 31, 2024.

 

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 three months ended March 31, 2024 is as follows: 

          
Nonvested at December 31, 2023   1,238   $20.17 
Vested   (310)   20.17 
Nonvested at March 31, 2024   928   $20.17 

 

Stock compensation expense related to restricted stock awards was $37 thousand and $0.1 million during each of the three months ended March 31, 2024 and 2023 respectively.

 

As of March 31, 2024, there were unvested shares of common stock representing $18 thousand of unrecognized restricted stock grant expense which will be recognized over 1 year.

 

Warrants

 

In 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 were 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 three months ended March 31, 2024, $0.3 million was recorded as expense and $1.3 million of cost has not been recognized and will be recognized over the next 4.0 years.

 

A summary of activity of warrants outstanding for the three months ended March 31, 2024 is as follows: 

          
   Number of Warrants   Weighted Average Exercise Price 
Outstanding at December 31, 2023   610,745   $9.80 
Granted   –    – 
Exercised   (40,027)   6.30 
Outstanding at March 31, 2024   570,718   $10.05 
Exercisable at March 31, 2024   570,718   $10.05 

 

Exercisable warrants as of March 31, 2024 have a weighted average remaining contractual life of 1.44 years. The intrinsic value of the exercisable shares of the warrants at March 31, 2024 was $0.2 million. . Warrants to purchase 370,718 shares of common stock at an exercise price equal to $6.30 which were issued in our 2019 public offering expired on April 18, 2024.