Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity

v3.21.2
Stockholders' Equity
9 Months Ended
Sep. 30, 2021
Stockholders' Equity  
Stockholders' Equity

9. Stockholders’ Equity

Underwritten Registered Offering

On January 21, 2020, the Company closed on a public offering consisting of 2,857,142 shares of common stock together with warrants to purchase 1,428,571 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, 2021 to September 30, 2021 the Company sold 2,106,027 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 $12.18 per share, raising aggregate net proceeds of $25,646,099 after deducting a commission up to 3%.

Common Stock Warrants

As of September 30, 2021, the Company has outstanding warrants to purchase 747,383 shares of common stock issuable at a weighted-average exercise price of $11.06 per share.

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

    

Common Stock 

Warrants

Outstanding, December 31, 2020

 

758,939

Issued

 

31,000

Expired

 

(42,556)

Outstanding, September 30, 2021

 

747,383

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 addition, at its 2021 Annual Meeting for Stockholders, the stockholders approved the Company’s  2021 Subsidiaries Stock Incentive Plan (the “SSIP”) which allows for the grant of equity interests in subsidiaries of the Company including Skunkworx Bio, Inc. (“SkunkWorx”), Scorpion Biological Services, Inc. (“Scorpion”), Abacus Biotech, Inc. (“Abacus”), Blackhawk Bio, Inc. (“Blackhawk”) and other newly formed

subsidiaries of the Company that adopt the SSIP by resolution of their Board of Directors. On August 2, 2021 the Board of Directors, the Compensation Committee and the Board of Directors of Skunkworx, Scorpion, Abacus and Blackhawk granted to Jeff Wolf an option under the SSIP to purchase 10,526, 10,638, 10,526 and 10,526 shares of common stock of Skunkworx, Scorpion, Abacus and Blackhawk, respectively, representing beneficial ownership of approximately 5.0% of the outstanding shares of common stock of each of Skunkworx, Scorpion, Abacus and Blackhawk, respectively.

Accounting for Stock-Based Compensation:

Stock Compensation Expense - For the three and nine months ended September 30, 2021, the Company recorded $0.9 million and $4.4 million of stock-based compensation expense, respectively. 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. No compensation expense of employees with stock awards was capitalized during the three and nine months ended September 30, 2021 and 2020.

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, 2021 and 2020, the Company issued options that expire ten years from the date of grant.

Fair Value Determination – The Company has used the Black-Scholes 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 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, 2021 and 2020:

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. The Company accounts for forfeitures as they occur.

The following table summarizes weighted-average assumptions used in our calculations of fair value for the nine months ended September 30, 2021 and 2020:

    

2021

2020

Dividend yield

 

%  

%

Expected volatility

 

102.15

%  

96.26

%

Risk-free interest rate

 

0.67

%  

0.52

%

Expected lives (years)

 

5.6

years

5.4

years

Stock Option Activity - The weighted-average fair value of options granted during the nine months ended September 30, 2021 and 2020, as determined under the Black-Scholes valuation model, was $4.41 and $6.30 per share, respectively.

The following is a summary of the stock option activity for the nine months ended September 30, 2021:

    

    

Weighted

 

 

Weighted

Average

 

Aggregate

 

Average

Exercise

 

Intrinsic

 

Remaining

Shares

Price

 

Value

 

Contractual Life

Stock options outstanding at December 31, 2020

1,480,139

$

11.05

$

628,169

Granted

 

604,094

 

5.69

 

Exercised

 

(69,493)

 

6.57

$

32,274

Forfeited/Expired

 

(124,566)

 

8.93

 

Stock options outstanding at September 30, 2021

 

1,890,174

$

9.64

$

817,628

8.7

Years

Stock options exercisable at September 30, 2021

1,089,062

$

12.59

$

266,618

8.4

Years

Unrecognized compensation expense related to unvested stock options was $2.9 million as of September 30, 2021, which is expected to be recognized over a weighted-average period of 1.4 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. 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, 2021:

Weighted

Average

Shares

Fair Value

Restricted stock at December 31, 2020

239,928

$

4.02

Granted

432,185

5.68

Vested

(412,239)

5.16

Cancelled

Restricted stock at September 30, 2021

259,874

$

4.96

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, 2021:

Weighted

Average

Shares

Fair Value

RSUs at December 31, 2020

1,900

$

26.60

Vested

 

(1,900)

 

26.60

Cancelled

 

 

RSUs at September 30, 2021

 

$