Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity

v3.20.2
Stockholders' Equity
9 Months Ended
Sep. 30, 2020
Stockholders’ Equity  
Stockholders' Equity

9. Stockholders’ Equity

Underwritten Registered Offering

On January 21, 2020, the Company closed on a public offering consisting of 20,000,000 shares of common stock together with Warrants to purchase 10,000,000 shares of common stock. The gross proceeds to the Company from this offering were approximately $7,000,000, before deducting underwriting discounts, commissions, and other offering expenses.

The Company has accounted for the warrants as liabilities and recorded them at fair value in our consolidated balance sheets (see Note 3).

At-The-Market-Offering

From January 1, 2020 to September 30, 2020 the Company sold approximately 91,399, 427 shares of common stock under the Common Stock Sales Agreement, and the Amended and Restated Common Stock Sales Agreement, at an average price of approximately $1.24 per share, raising aggregate net proceeds of approximately $113,386,822 after deducting an aggregate commission up to 3%.

Common Stock Warrants

During the nine months ended September 30, 2020, 10,000,000 January 2020 warrants were exercised for 7,500,000 shares of common stock, and 3,291,666 previously outstanding warrants were exchanged for 2,238,332 shares of common stock. As of September 30, 2020, the Company has outstanding warrants to purchase 5,739,064 shares of common stock issuable at a weighted-average exercise price of $2.04 per share.

The following table summarizes the warrant activity of the Company’s common stock warrants.

 

 

 

 

    

Common Stock 

 

 

Warrants

Outstanding, December 31, 2019

 

9,030,730

Issued

 

10,000,000

Exercised

 

(10,000,000)

Exchanged

 

(3,291,666)

Outstanding, September 30, 2020

 

5,739,064

 

Equity Compensation Plans

The Company maintains various equity compensation plans with substantially similar provisions under which it may award employees, directors and consultants incentive and non-qualified stock options, restricted stock, stock appreciation rights and other stock based awards with terms established by the Compensation Committee of the Board of Directors which has been appointed by the Board of Directors to administer the plans. In July 2019, the Company’s shareholders approved an increase of 4,000,000 shares in the number of shares available for grant. At the 2020 Special Meeting of Stockholders, the stockholders approved an amendment to the Plan to increase the number of shares by 4,000,000.  In August 2020, the Company’s shareholders approved an increase of 15,000,000 shares in the number of shares available for grant. As of September 30, 2020, there were 13,727,222 shares remaining available for grant under these plans. 

Accounting for Stock-Based Compensation:

Stock Compensation Expense - For the three and nine months ended September 30, 2020, the Company recorded $4.7 million, and $6.1 million of stock-based compensation expense, respectively. For the three and nine months ended September 30, 2019, the Company recorded $0.5 million, and $2.9 million of stock-based compensation expense respectively. No compensation expense of employees with stock awards was capitalized during the three and nine months ended September 30, 2020 and 2019.

Stock Options - Under the Plan, the Company has issued stock options. A stock option grant gives the holder the right, but not the obligation to purchase a certain number of shares at a predetermined price for a specific period of time. The Company typically issues options that vest over four years in equal installments beginning on the first anniversary of the date of grant. Under the terms of the Plan, the contractual life of the option grants may not exceed ten years. During the nine months ended September 30, 2020 and 2019,  the Company issued options that expire ten years from the date of grant.

Fair Value Determination – The Company has used the Black-Scholes-Merton option pricing model to determine fair value of our stock option awards on the date of grant. The Company will reconsider the use of the Black-Scholes-Merton model if additional information becomes available in the future that indicates another model would be more appropriate or if grants issued in future periods have characteristics that cannot be reasonably estimated under this model.

 

The following weighted-average assumptions were used for option grants during the three and nine months ended September 30, 2020 and 2019:

 

·

Volatility –  The Company used an average historical stock price volatility of its own data plus an analysis of reported data for a peer group of comparable companies that have issued stock options with substantially similar terms.

 

·

Expected life of optionsThe expected term represents the period that the Company’s stock option grants are expected to be outstanding. The Company elected to utilize the “simplified” method to estimate the expected term. Under this approach, the weighted-average expected life is presumed to be the average of the vesting term and the contractual term of the option.

 

·

Risk-free interest rateThe rate is based on U.S. Treasury interest rates at the time of the grant whose term is consistent with the expected life of the stock options. 

 

·

Dividend yieldThe expected dividend yield was considered to be 0% in the option pricing formula since the Company had not paid any dividends and had no plan to do so in the future.

 

·

ForfeituresAs required by ASC 718, the Company reviews recent forfeitures and stock compensation expense. Forfeitures are estimated at the time of the grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Additionally, the Company conducts a sensitivity analysis of the forfeiture rate. Based on these evaluations the Company currently does not apply a forfeiture rate.

The following table summarizes weighted-average assumptions used in our calculations of fair value for the nine months ended September 30, 2020 and 2019:

 

 

 

 

 

 

 

 

    

2020

 

 

2019

 

Dividend yield

 

 —

%  

 

 —

%

Expected volatility

 

96.26

%  

 

132.00

%

Risk-free interest rate

 

0.52

%  

 

2.50

%

Expected lives (years)

 

5.4

years

 

5.5

years

 

Stock Option Activity -  The weighted-average fair value of options granted during the nine months ended September 30, 2020 and 2019, as determined under the Black-Scholes valuation model, was $0.90 and $0.91, respectively.

 

The following is a summary of the stock option activity for the nine months ended September 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

    

 

    

Weighted

 

Weighted

 

 

 

 

Average

 

Average

 

 

 

 

Exercise

 

Remaining

 

 

Shares

 

Price

 

Contractual Life

Stock options outstanding at December 31, 2019

 

3,063,636

 

$

2.56

 

 

 

Granted

 

6,164,100

 

 

1.22

 

 

 

Exercised

 

(17,187)

 

 

0.53

 

 

 

Forfeited/Expired

 

(53,684)

 

 

1.90

 

 

 

Stock options outstanding at September 30, 2020

 

9,156,865

 

$

1.67

 

9.1

Years

Stock options exercisable at September 30, 2020

 

5,921,313

 

$

2.14

 

9.1

Years

 

Unrecognized compensation expense related to unvested stock options  was $2.0 million as of September 30, 2020, which is expected to be recognized over a weighted-average period of 1.6 years and will be adjusted for forfeitures as they occur.

Restricted Stock - Under the Plan, the Company has issued restricted stock. A restricted stock award is an issuance of shares that cannot be sold or transferred by the recipient until the vesting period lapses. Restricted stock issued to members of our Board of Directors and executives vest 50% on grant date, 30% on the first anniversary and 10% each anniversary thereafter. The grant date fair value of the restricted stock is equal to the closing market price of our common stock on the date of grant. 

The following is a summary of restricted stock award activity for the nine months ended September 30, 2020:

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

Average

 

 

Shares

 

Fair Value

Restricted stock at December 31, 2019

 

1,254,653

 

$

0.86

Granted

 

2,380,000

 

 

0.46

Vested

 

(1,622,720)

 

 

0.62

Restricted stock at September 30, 2020

 

2,011,933

 

$

0.58

 

Restricted Stock Units - Under the Plan, the Company issued time-based RSUs. RSUs are not actual shares, but rather a right to receive shares in the future. The shares are not issued and the employee cannot sell or transfer shares prior to vesting and has no voting rights until the RSUs vest. The employees' time-based RSUs vest 25% on the award date and 25% each anniversary thereafter. The grant date fair value of the RSUs is equal to the closing market price of our common stock on the grant date. The Company recognizes the grant date fair value of RSUs of shares the Company expects to issue as compensation expense ratably over the requisite service period.

 

The following is a summary of stock unit activity for the nine months ended September 30, 2020:

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

Average

 

 

Shares

 

Fair Value

RSUs at December 31, 2019

 

30,026

 

$

4.33

Vested

 

(16,406)

 

 

4.73

Cancelled

 

(338)

 

 

5.20

RSUs at September 30, 2020

 

13,282

 

$

3.80