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Stockholders' Equity

9 Months Ended

Sep. 30, 2021

Stockholders' Equity Note [Abstract]

Stockholders' Equity

9. Stockholders’ Equity

2011 Equity Incentive Plan

The Company’s 2011 Equity Incentive Plan, as amended and restated (the “Plan”), is designed and utilized to enable the Company to provide its employees, officers, directors, consultants, and others whose past, present, and/or potential contributions to the Company have been, are, or will be important to the success of the Company, an opportunity to acquire a proprietary interest in the Company. A total of 13,000,000 shares of common stock are eligible for issuance under the Plan. The Plan provides for the grant of any or all of the following types of awards: stock options, restricted stock, deferred stock, stock appreciation rights, and other stock-based awards. The Plan is administered by the Company’s Board of Directors, or, at the Board’s discretion, a committee of the Board.

The Company accounts for stock-based compensation in accordance with Accounting Standards Codification Topic 718, “Compensation - Stock Compensation,” by recognizing the fair value of stock-based compensation as an operating expense over the service period of the award or term of the corresponding contract, as applicable.

The fair value of options and warrants is estimated on the date of grant using the Black-Scholes option pricing model. The valuation determined by the Black-Scholes option pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The risk-free rate is based on the U.S. Treasury rate for the expected life at the time of grant, volatility is based on the long-term implied volatilities of the Company’s stock, and expected life is based on the estimated average of the life of options and warrants using the simplified method. The Company utilizes the simplified method to determine the expected life of the options and warrants due to insufficient exercise activity during recent years as a basis from which to

estimate future exercise patterns. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts.

Restricted stock awards are valued using the fair value of the Company’s stock at the date of grant.

For stock option awards for which vesting is contingent upon the achievement of certain performance targets, the timing and amount of compensation expense recognized is based upon the Company’s projections and estimates of the relevant performance metric(s) until the time the performance obligation is satisfied.

Forfeitures are accounted for as a reduction of compensation cost in the period when such forfeitures occur.

Stock Options

Options granted under the Plan expire at various times – either five, seven, or ten years from the date of grant, depending on the particular grant.

A summary of the Company’s stock options activity for the current nine months is as follows:


							Weighted
							Average
				Weighted			Remaining
				Average			Contractual		Aggregate
		Number of		Exercise			Life		Intrinsic
		Options		Price			(in Years)		Value
Outstanding at January 1, 2021		7,179,375		$	3.14		4.93		$	—
Granted		510,390			1.91
Canceled		(8,050)			1.86
Exercised		(99,700)			1.77
Expired/Forfeited		(1,771,070)			5.63
Outstanding at September 30, 2021, and expected to vest		5,810,945		$	2.32		5.56		$	—
Exercisable at September 30, 2021		1,931,778		$	3.40		2.10		$	—

On March 15, 2021, the Company granted options to purchase an aggregate of 365,390 shares of common stock to various employees. The exercise price of the options is $1.86 per share, and all options vested immediately on the date of grant.

On April 1, 2021, the Company granted options to purchase an aggregate of 125,000 shares of common stock to non-management directors. The exercise price of the options is $1.93 per share, and 50% of the options vest on each of April 1, 2022 and April 1, 2023.

On July 1, 2021, the Company granted options to purchase an aggregate of 20,000 shares of common stock to a member of management. The exercise price of the options is $2.76 per share, and 50% of the options vest on each of June 1, 2022 and June 1, 2023.

Compensation expense related to stock options for the current quarter and the prior year quarter was approximately $48,000 and $45,000, respectively. Compensation expense related to stock options for the current nine months and prior year nine months was approximately $246,000 and $158,000, respectively.

Total unrecognized compensation expense related to unvested stock options at September 30, 2021 amounts to approximately $125,000 and is expected to be recognized over a weighted average period of approximately 1.16 years.

A summary of the Company’s non-vested stock options activity for the current nine months is as follows:


				Weighted
				Average
		Number of		Grant Date
		Options		Fair Value
Balance at January 1, 2021		4,116,167		$	0.08
Granted		510,390			0.44
Vested		(647,390)			0.43
Forfeited or Canceled		(100,000)			0.08
Balance at September 30, 2021		3,879,167		$	0.06

Warrants

Warrants expire at various times – either five or ten years from the date of grant, depending on the particular grant.

A summary of the Company’s warrants activity for the current nine months is as follows:


							Weighted
							Average
				Weighted			Remaining
				Average			Contractual		Aggregate
		Number of		Exercise			Life		Intrinsic
		Warrants		Price			(in Years)		Value
Outstanding and exercisable at January 1, 2021		579,815		$	4.63		1.32		$	—
Granted		—			—
Canceled		—			—
Exercised		—			—
Expired/Forfeited		(463,750)			5.00
Outstanding and exercisable at September 30, 2021		116,065		$	3.15		2.83		$	—

No compensation expense related to warrants was recognized in the current quarter, prior year quarter, current nine months, or prior year nine months.

Stock Awards

A summary of the Company’s restricted stock activity for the current nine months is as follows:


				Weighted
		Number of		Average
		Restricted		Grant Date
		Shares		Fair Value
Outstanding at January 1, 2021		780,833		$	4.09
Granted		254,623			1.69
Canceled		—			—
Vested		(204,623)			1.63
Expired/Forfeited		—			—
Outstanding at September 30, 2021		830,833		$	3.96

On April 1, 2021, the Company issued an aggregate of 50,000 shares of stock to non-management directors, which vest evenly over two years, whereby 50% shall vest on April 1, 2022, and 50% shall vest on April 1, 2023.

On April 26, 2021, the Company issued 14,045 shares of stock to a consultant, which vested immediately.

On July 1, 2021, the Company issued 9,399 shares of stock to a consultant, which vested immediately.

Compensation expense related to restricted stock grants for the current and prior year quarter was approximately $37,000 and $11,000, respectively. Compensation expense related to restricted stock grants for the current nine months and prior year nine months was approximately $84,000 and $44,000, respectively.

Total unrecognized compensation expense related to unvested restricted stock grants at September 30, 2021 amounts to approximately $72,000 and is expected to be recognized over a weighted average period of approximately 1.50 years.

Additionally, on May 7, 2021, the Company issued 181,179 shares of stock to a member of senior management as payment for a performance bonus earned in 2020. These shares vested immediately. The Company had previously recognized compensation expense of approximately $291,000 in 2020 to accrue for this performance bonus, and recognized a reduction to compensation expense of approximately $(8,000) during the current nine months related to this bonus. The Company also recognized approximately $46,000 and $400,000 of compensation expense in the current quarter and current nine months, respectively, related to similar senior management bonuses payable in common stock in 2022.

The Company also recognized approximately $32,000 of compensation expense in the current quarter and current nine months to accrue for a contractual payment to an employee that will be paid in shares in the fourth quarter of 2021.

Shares Available Under the Company’s 2011 Equity Incentive Plan

As of September 30, 2021, there were 2,636,969 shares of common stock available for issuance under the Plan.

Shares Reserved for Issuance

As of September 30, 2021, there were 8,563,979 shares of common stock reserved for issuance pursuant to unexercised warrants and stock options, or available for issuance under the Plan.

Dividends

The Company has not paid any dividends to date.