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STOCKHOLDERS’ EQUITY
 12 Months Ended
Dec. 31, 2021
Equity [Abstract]  
STOCKHOLDERS’ EQUITY

NOTE 6 - STOCKHOLDERS’ EQUITY

 

Common Stock

 

The common stock confers upon the holders the right to receive notice to participate and vote in general meetings of the Company, and the right to receive dividends, if declared, and to participate in the distribution of the surplus assets and funds of the Company in the event of liquidation, dissolution or winding up of the Company.

 

As of December 3, 2020, we had 20,000,000 authorized shares of our common stock and 19,850,014 shares of common stock outstanding resulting in 149,986 shares of common stock being available for issuance. On December 4, 2020, certain holders of the Company’s Series C Preferred Stock converted 396,509 shares of Series C Preferred Stock into 396,509 shares of common stock, resulting in an overissue of 246,523 shares of common stock. Beginning on December 17, 2020, through January 22, 2021, certain holders of warrants we had issued in December 2020 (the “December 2020 Warrants”) exercised a portion of the December 2020 Warrants for 2,657,144 shares of Common Stock, resulting in an additional overissue of 2,657,144 shares of Common Stock. As of December 31, 2020, the aggregate number of shares of common stock that was overissued by the Company was 4,109,634. The shares issued in excess of the authorized amount are classified as liabilities. The common stock equivalents are subject to the Company’s sequencing policy and are classified as derivative liabilities (see Note 8). On March 3, 2021, the Company filed a proxy statement in connection with a special meeting of stockholders to was to be held on March 31, 2021, but postponed until May 6, 2021 to (i) ratify the increase in the number of authorized shares of common stock from 20,000,000 to 24,109,635 and the issuance of such 4,109,635 shares of common stock, and (ii) further increase the number of our authorized shares of common stock. On May 6, 2021, the Company’s stockholders voted to approve the ratification of the increase in the number of authorized shares of common stock from 20,000,000 to 24,109,635 and the issuance of such 4,109,635 shares of common stock to be effective as of December 4, 2020, but the stockholders did not approve a further increase in the number of its authorized shares of common stock.

 

On August 17, 2021, the Company’s stockholders voted to approve an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the number of shares of the Company’s Common Stock authorized for issuance from 24,109,635 shares to 40,000,000 shares. As a result of the vote to increase the number of shares authorized for issuance, the warrants that were previously accounted for as derivative liabilities were marked to market through the date of approval and then reclassified to additional paid in capital (equity), as the Company had sufficient authorized shares to settle the exercise of the warrants.

 

Issuance of common stock for cash

 

On August 24, 2020, the Company entered into an underwriting agreement with H.C. Wainwright & Co., LLC (“Wainwright”) (as amended and restated, the “August Underwriting Agreement”). Pursuant to the August Underwriting Agreement, the Company sold, in an upsized firm commitment offering, 4,531,434 shares of the Company’s common stock, to Wainwright at an offering price to the public of $0.75 per share, less underwriting discounts and commissions. The Company received net proceeds from the sale of such offering, after deducting underwriting discounts and commissions and other estimated offering expenses payable by the Company, of approximately $2.7 million. In addition, as partial compensation for Wainwright’s services as underwriter in the offering, the Company has issued to Wainwright’s designees warrants to purchase 339,858 shares of common stock. The warrants expire on August 24, 2025 and have an exercise price of $0.9375 per share.

 

 

On September 22, 2020, the Company entered into an underwriting agreement with Wainwright (as amended and restated, the “September Underwriting Agreement”). Pursuant to the September Underwriting Agreement, the Company sold, in an upsized firm commitment offering, 1,794,783 shares of common stock to Wainwright at an offering price to the public of $1.00 per share, less underwriting discounts and commissions. The Company received net proceeds from the sale of such offering, after deducting underwriting discounts and commissions and other estimated offering expenses payable by the Company, of approximately $1.4 million. In addition, as partial compensation for Wainwright’s services as underwriter in the offering, the Company issued to Wainwright’s designees warrants to purchase 134,609 shares of common stock. The warrants expire on September 22, 2025 and have an exercise price of $1.25 per share.

 

On December 2, 2020, the Company entered into a Securities Purchase Agreement with certain institutional and accredited investors pursuant to which the Company issued and sold to such investors in a private placement (the “Private Placement”) an aggregate of (i) 5,914,285 shares of the Company’s common stock at an offering price of $0.70 per share and (ii) pre-funded warrants to purchase up to 2,657,144 shares of common stock (the “Pre-funded Warrants”), at a purchase price of $0.699 per Pre-funded Warrant, for gross proceeds of approximately $6.0 million.

 

The Pre-funded Warrants have an exercise price of $0.001 per share. The Pre-funded Warrants are immediately exercisable and may be exercised at any time after their original issuance until such Pre-funded Warrants are exercised in full. A holder of a Pre-funded Warrant may not exercise any portion of such holder’s Pre-funded Warrants to the extent that the holder, together with its affiliates, would beneficially own more than 4.99% (or, at the election of the holder, 9.99%) of the Company’s outstanding shares of common stock immediately after exercise, except that upon at least 61 days’ prior notice from the holder to the Company, the holder may increase the beneficial ownership limitation to up to 9.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise.

 

The net proceeds to the Company from the Private Placement were approximately $5,400, after deducting placement agent fees and expenses and estimated offering expenses payable by the Company. The Company intends to use the net proceeds from the Private Placement for general corporate purposes. The Private Placement closed on December 7, 2020.

 

Series C, D and E Preferred Stock conversion to common stock

 

Each share of Series E Preferred Stock is convertible at any time and from time to time at the option of a holder of Series E Preferred Stock into one share of the Company’s common stock, provided that each holder would be prohibited from converting Series E Preferred Stock into shares of the Company’s common stock if, as a result of such conversion, any such holder, together with its affiliates, would own more than 9.99% of the total number of shares of the Company’s common stock then issued and outstanding. This limitation may be waived with respect to a holder upon such holder’s provision of not less than 61 days’ prior written notice to the Company.

 

During the years ended December 31, 2021 and 2020, shareholders converted 875,000 and 950,000 shares of Series E Preferred Stock into 875,000 and 950,000 shares of common stock, respectively, at a conversion rate of 1 to 1. No purchase was made in order to convert these shares.

 

Each share of Series D Preferred Stock is convertible into 1,000 shares of common stock at any time at the option of the holders, provided that each holder would be prohibited from converting Series D Preferred Stock into shares of common stock if, as a result of such conversion, any such holder, together with its affiliates, would own more than 4.99% of the total number of shares of common stock then issued and outstanding. This limitation may be waived with respect to a holder upon such holder’s provision of not less than 61 days’ prior written notice to the Company.

 

 

During the years ended December 31, 2021 and 2020, shareholders converted 153 and 151 shares of Series D Preferred Stock into 153,000 and 151,000 shares of common stock, respectively, at a conversion rate of 1 to 1,000. No purchase was made in order to convert these shares.

 

Each share of Series C Preferred Stock is convertible into one share of common stock at any time at the option of the holders, provided that each holder would be prohibited from converting Series C Preferred Stock into shares of common stock if, as a result of such conversion, any such holder, together with its affiliates, would own more than 9.99% of the total number of shares of common stock then issued and outstanding. This limitation may be waived with respect to a holder upon such holder’s provision of not less than 61 days’ prior written notice to the Company.

 

During the years ended December 31, 2021 and 2020, shareholders converted 666,667 and 2,326,475 shares of Series C Preferred Stock into 666,667 and 2,236,475 shares of common stock, respectively, at a conversion rate of 1 to 1. No purchase was made in order to convert these shares.

 

Stock-based compensation and options

 

During the years ended December 31, 2021 and 2020, no employee options were exercised, and 877,500 and 997,000 options were granted, respectively. The options granted during 2021 and 2020 vest at different schedules ranging from date granted to 3 years and were recorded at fair values of $583 and $561, respectively. During the years ended December 31, 2021 and 2020, stock-based compensation expense of $258 and $376 was recorded for options that vested, respectively. During the year ended December 31, 2021, 13,845 options expired.

 

On November 2, 2020, the Company entered into an option cancellation and release agreement with some of its option holders, pursuant to which the parties agreed to cancel options to purchase an aggregate of 804,788 shares of common stock of the Company at exercise prices ranging from $2.57 to $6.00 (the “Options”) previously granted to each of the Option holders. In exchange for the cancellation of the Options, the Company paid $1.00 to each Option holder.

 

  

Shares Under

Options

  

Weighted

Average

Exercise Price

per Share

  

Weighted

Average

Remaining

Life (Years)

 
Outstanding – December 31, 2020   1,748,544   $1.59    7.52 
Granted   877,500    1.02    9.80 
Forfeited   (72,200)   3.99    3.98 
Expired   (13,845)   1.23    - 
Exercised   -    -    - 
Outstanding – December 31, 2021   2,539,999   $1.33    7.77 

 

The fair value for options granted in 2021 and 2020 is estimated at the date of grant using a Black-Scholes-Merton options pricing model with the following underlying assumptions:

 

Price at valuation  $ 0.72 – 2.07  
Exercise price  $ 0.72 – 2.07  
Risk free interest   0.27 –1.29 %
Expected term (in years)   5 
Volatility   60.9% - 82.7 %

 

 

The total stock-based expense recognized in the financial statements for services received from employees and non-employees is shown in the following table.

 

            
   Year Ended 
   December 31, 
   2021   2020 
         
Research and development  $17   $9 
Selling and marketing   51    43 
General and administrative   382    324 
Total  $450   $376 

 

As of December 31, 2021, the total unrecognized estimated compensation cost related to non-vested stock options granted prior to that date was $413, which is expected to be recognized over a weighted average period of approximately 2.19 years.

 

 

Warrants

 

During the year ended December 31, 2020, the Company granted 3,774,468 warrants to purchase Company’s common in conjunction with the private placements and a seven-year equity warrant to purchase 100,000 shares of the Company’s common stock in conjunction with notes payable (see note 7). On December 17, 2020, 1,000,000 pre-funded warrants were exercised at $0.001 per share.

 

On December 2, 2020, we entered into a Securities Purchase Agreement with certain institutional and accredited investors pursuant to which the Company issued and sold to such investors in a private placement an aggregate of (i) 5,914,285 shares of the Company’s common stock at an offering price of $0.70 per share and (ii) pre-funded warrants to purchase up to 2,657,144 shares of common stock at a purchase price of $0.699 per pre-funded warrant, for gross proceeds of approximately $6.0 million, and net proceeds of approximately $5.4 million. In January 2021, two investors exercised an aggregate of 1,657,144 warrants at $0.001 per share.

 

On January 21, 2021, Company entered into letter agreements (the “Letter Agreements”) with certain existing accredited investors to exercise certain outstanding warrants (the “Existing Warrants”) to purchase up to an aggregate of 1,205,968 shares of the Company’s common stock at an exercise price per share of $1.165 (the “Exercise”). Certain of the Existing Warrants (the “Registered Existing Warrants”) and the shares of common stock underlying the Registered Existing Warrants have been registered pursuant to a registration statement on Form S-3 (File No. 333-251264) and a registration statement on Form S-1 (File No. 333-218871). In consideration for the exercise of the Existing Warrants for cash, the exercising holders received new unregistered warrants to purchase up to an aggregate of 1,205,967 shares of common stock (the “New Warrants”) at an exercise price of $1.04 per share and with an exercise period of seven years from the initial closing date. The gross proceeds to the Company from the Exercise were approximately $1.4 million.

 

The New Warrants were accounted for in warrant modification expense, which was measured at the amount equal to the incremental value reflecting the change in the fair value of the warrants before and after the Warrant Amendment. Accordingly, warrant modification expense in the amount of $1,627 was recorded with a corresponding increase in additional paid in capital.

 

In August and September 2021, investors exercised warrants to purchase 2,193,492 shares of common stock between $0.88 and $2.50 per share for proceeds of approximately $3.6 million.

 

In estimating the warrants’ fair value, the Company used the following assumptions:

  

Risk free interest   1.44%
Dividend yield   0%
Volatility   55.6% - 56.5%
Contractual term (in years)   2 

 

 

   Warrants 
Outstanding – December 31, 2019   4,850,272 
Granted   3,874,468 
Exercised   (1,000,000)
Expired   - 
Outstanding – December 31, 2020   7,724,740 
Granted   1,205,967 
Exercised   (5,056,603)
Exercised - cashless   

(281,424

)
Expired   (620,001)
Canceled    (663,332)
Outstanding – December 31, 2021   2,309,347