15.Equity

Registered direct purchase agreement and commitment purchase agreement and registration rights agreement

On May 9, 2018 the Company entered into a registered direct purchase agreement (the “Registered Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“LPC”) pursuant to which LPC purchased 3,153,808 shares of the Company’s common stock at a price of $0.4122 per share, the closing price of the Company’s common stock on the NYSE American on May 8, 2018, for an aggregate purchase price of $1.3 million.

On May 9, 2018, the Company also entered into a commitment purchase agreement (the “Commitment Purchase Agreement” and together with the Registered Purchase Agreement, the “LPC Program”) and a registration rights agreement (the “Registration Rights Agreement”) with LPC, pursuant to which the Company, at its sole discretion, has the right to sell up to an additional $10.0 million of the Company’s common stock to LPC, subject to certain limitations and conditions contained in the Commitment Purchase Agreement. The Company closed on the Commitment Purchase Agreement in July 2018.

On June 7, 2018, pursuant to the terms of the Registration Rights Agreements, the Company filed a registration statement on Form S-1 (File No. 333-225483) (the “Registration Statement”) registering the resale up to 15,222,941 shares of the Company’s common stock to be issued to LPC pursuant to the terms of the Commitment Purchase Agreement. The Registration Statement was declared effective on June 28, 2018. Proceeds from the LPC Program will be used for general corporate purposes, including advancing the exploration program at the Company’s El Quevar property in Argentina.

Subject to the terms of the Commitment Purchase Agreement, the Company will control the timing and amount of any future sale of the Company’s common stock to LPC. LPC has no right to require any sales by the Company under the Commitment Purchase Agreement but is obligated to make purchases at the Company’s sole direction, as governed by such agreement. There are no upper limits to the price LPC may be obligated to pay to purchase common stock from the Company and the purchase price of the shares will be based on the prevailing market prices of the Company’s shares at the time of each sale to LPC. LPC has agreed not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the Company’s shares of common stock. The Company has the right to terminate the Commitment Purchase Agreement at any time, at its discretion, without any cost or penalty.

In consideration for LPC’s commitment to purchase shares pursuant to the Commitment Purchase Agreement, the Company paid LPC a commitment fee of $300,000 and incurred an additional approximate $190,000 in stock exchange fees, legal and other associated costs in connection with the LPC Program. The total costs for the LPC Program will be recorded as a reduction to equity as common stock is sold to LPC. As of December 31, 2018, approximately $58,000 of LPC Program costs had been amortized against $1.3 million in proceeds received, resulting in $432,000 of deferred LPC Program costs, recorded in “Prepaid expenses and other assets” on the Consolidated Balance Sheets.

As of December 31, 2018, no additional common stock had been sold to LPC under the LPC Program following the initial sale of common stock pursuant to the Registered Purchase Agreement. Subsequent to December 31, 2018 the Company sold an aggregate of approximately 745,000 common shares under the Commitment Purchase Agreement at an average price of $0.31 per common share for total proceeds of approximately $230,000 during the year to date period ended February 27, 2019.

Cancellation of Treasury Shares

Pursuant to the terms of an agreement between the Company and ECU, relating to the merger of the two companies on September 2, 2011, ECU shareholders had the right to receive 0.05 shares of the Company’s common stock for each share of ECU common stock held. On the sixth anniversary following the merger any unconverted shares expired per the terms of the agreement. Accordingly, during December 2017, ECU shares being held for conversion, representing 125,739 shares of the Company, were returned to treasury and canceled.

Consideration Shares

On August 2, 2017, the Company granted Hecla an option to extend the oxide plant lease for an additional period of up to two years (see Note 16). As partial consideration for the option Hecla purchased $1.0 million, or approximately 1.8 million shares, of the Company’s common stock (the “Consideration Shares”), issued at a price of $0.55 per share, which was the undiscounted 30-day volume weighted average stock price. The Consideration Shares were offered and sold without registration under the Securities Act of 1933, as amended (the “Act”) in reliance on the exemptions provided by Section 4(a)(2) of the Act and/or Regulation D promulgated thereunder. Under the terms of the Option Agreement (defined in Note 16), the Company agreed to register with the SEC the resale of the Consideration Shares. A resale registration statement with the SEC became effective in September 2017. The $1.0 million received for the Consideration Shares, net of $71,000 in legal and stock exchange issuance fees, has been recorded as equity in the Consolidated Balance Sheets at December 31, 2017.

At the Market Offering Agreement

In December 2016, the Company entered into an at-the-market offering agreement (as amended from time to time, the “ATM Agreement”) with H. C. Wainwright & Co., LLC (“Wainwright”), under which the Company may, from time to time, issue and sell shares of the Company’s common stock through Wainwright as sales manager in an at-the-market offering under a prospectus supplement for aggregate sales proceeds of up to $5.0 million (the “ATM Program”) or a maximum of 10 million shares. On September 29, 2017, the Company entered into an amendment to the ATM Agreement with Wainwright to reflect a new registration statement on Form S-3 (File No. 333-220461) under which shares of the Company’s common stock may be sold under the ATM Program. On November 23, 2018 the Company entered into a second amendment of the ATM Agreement extending the agreement until the earlier of December 20, 2020, or the date that the ATM Agreement is terminated in accordance with the terms therein. Offers or sales of common shares under the ATM Program will be made only in the United States and no offers or sales of common shares under the ATM Agreement will be made in Canada. The common stock will be distributed at the market prices prevailing at the time of sale. As a result, prices of the common stock sold under the ATM Program may vary as between purchasers and during the period of distribution. The ATM Agreement provides that Wainwright will be entitled to compensation for its services at a commission rate of 2.0% of the gross sales price per share of common stock sold.

The Company reimbursed certain legal expenses of Wainwright totaling $50,000 and incurred additional accounting, legal, and regulatory costs of approximately $109,000 in connection with establishing the ATM Program. Such costs have been deferred and will be amortized to equity as sales are completed under the ATM Program. At December 31, 2018 and December 31, 2018, respectively, unamortized costs totaling $136,000 appear on the accompanying Consolidated Balance Sheets as “Prepaid expense and other assets.”

The Company did not sell any stock under the ATM Program during the year ended December 31, 2018. Subsequent to December 31, 2018 the Company sold an aggregate of approximately 34,000 common shares under the Commitment Purchase Agreement at an average price of $0.34 per common share for total proceeds of approximately $11,000 during the year to date period ended February 27, 2019. During the year ended December 31, 2018 the Company incurred approximately $15,000 in additional accounting, legal, and regulatory costs associated with the ATM Program that were included in “General and administrative costs” in the Consolidated Statement of Operations and Comprehensive Loss.

During the year ended December 31, 2017 the Company sold an aggregate of approximately 1,024,000 common shares under the ATM Program at an average price of $0.70 per common share for gross proceeds of approximately $720,000. The Company paid cash commissions and other nominal transaction fees to Wainwright totaling approximately $16,000 or 2.2% of the gross proceeds and amortized approximately $23,000 of deferred accounting, legal and regulatory costs resulting in a net amount of approximately $682,000 that has been recorded as equity in the Consolidated Balance Sheets. During the year ended December 31, 2017 the Company also incurred approximately $34,000 in additional accounting, legal, and regulatory costs associated with the ATM Program that were included in “General and administrative costs” in the Consolidated Statement of Operations and Comprehensive Loss.

Equity Incentive Plans

Under the Company’s Amended and Restated 2009 Equity Incentive Plan (the “Equity Plan”) awards of the Company’s common stock may be made to officers, directors, employees, consultants and agents of the Company and its subsidiaries. The Company recognizes stock-based compensation costs using a graded vesting attribution method whereby costs are recognized over the requisite service period for each separately vesting portion of the award.

The following table summarizes the status of the Company’s restricted stock grants issued under the Equity Plan at December 31, 2018 and 2017 and changes during the years then ended:


	The Year Ended December 31,
	2018			2017
		Weighted			Weighted
		Average Grant			Average
		Date Fair			Grant Date
	Number of	Value Per		Number of	Fair Value
Restricted Stock Grants	Shares	Share		Shares	Per Share
Outstanding at beginning of period	203,334	$	0.55	100,000	$	0.63
Granted during the period	280,000		0.37	200,000		0.53
Restrictions lifted during the period	(143,333)		0.44	(96,666)		0.60
Forfeited during the period	—		—	—		—
Outstanding at end of period	340,001	$	0.45	203,334	$	0.55

During the year ended December 31, 2018 the Company recognized approximately $0.1 million of compensation expense related to the restricted stock grants. The Company expects to recognize additional compensation expense related to these awards of approximately $0.1 million over the next 24 months. During the year ended December 31, 2018, 280,000 shares were granted to six employees, with one third of the grants vesting on the grant date and the remaining shares vesting equally on the first and second anniversaries of the grant date. In addition to the vesting of one third of the shares granted in 2018, restrictions were lifted on 50,000 shares granted to an employee in a prior year.

During the year ended December 31, 2017 the Company recognized approximately $0.1 million of compensation expense related to the restricted stock grants. During the year ended December 31, 2017, 200,000 shares were granted to two employees, with 50,000 shares of one grant vesting on the grant date and the remaining shares vesting equally on the first and second anniversaries of the grant date. The remaining grant vests ratably over three years. In addition, during 2017, restrictions were lifted on 46,666 shares granted to three employees in a prior year.

The following table summarizes the status of the Company’s stock option grants issued under the Equity Plan at December 31, 2018 and 2017 and changes during the years then ended:


	The Year Ended December 31,
	2018			2017
		Weighted			Weighted
		Average			Average
		Exercise			Exercise
	Number of	Price Per		Number of	Price Per
Equity Plan Options	Shares	Share		Shares	Share
Outstanding at beginning of period	40,310	$	8.05	95,810	$	8.02
Granted during the period	—		—	—		—
Forfeited or expired during period	(10,000)	$	8.00	(55,500)		8.00
Exercised during period	—		—	—		—
Outstanding at end of period	30,310	$	8.06	40,310	$	8.05
Exercisable at end of period	30,310	$	8.06	40,310	$	8.05
Granted and vested	30,310	$	8.06	40,310	$	8.05

The Company does not expect to record any additional expense related to these options.

Also, pursuant to the Equity Plan, the Company’s Board of Directors adopted the Non-Employee Director’s Deferred Compensation and Equity Award Plan (the “Deferred Compensation Plan”). Pursuant to the Deferred Compensation Plan the non-employee directors receive a portion of their compensation in the form of Restricted Stock Units (“RSUs”) issued under the Equity Plan. The RSUs vest on the first anniversary of the grant and each vested RSU entitles the director to receive one unrestricted share of common stock upon the termination of the director’s board service.

The following table summarizes the status of the RSU grants issued under the Deferred Compensation Plan at December 31, 2018 and 2017 and changes during the years then ended:


	The Year Ended December 31,
	2018			2017
		Weighted			Weighted
		Average Grant			Average
		Date Fair			Grant Date
	Number of	Value Per		Number of	Fair Value
Restricted Stock Units	Shares	Share		Shares	Per Share
Outstanding at beginning of period	1,887,317	$	1.16	1,607,317	$	1.28
Granted during the period	600,000		0.42	280,000		0.48
Restrictions lifted during the period	(257,279)		1.44	—		—
Forfeited during the period	—		—	—		—
Outstanding at end of period	2,230,038	$	0.93	1,887,317	$	1.16

For the years ended December 31, 2018 and 2017 the Company recognized approximately $0.2 million and $0.1 million of compensation expense, respectively related to the RSU grants. During 2018, 100,000 RSUs were granted to each of the six board members. During 2017, 40,000 RSUs were granted to each of the seven board members. Restrictions lifted on 257,279 RSU shares during 2018 relate to the retirement of a member of the Company’s Board of Directors during the year. The Company expects to recognize additional compensation expense related to the RSU grants of less than $0.1 million over the next six months.

Key Employee Long-Term Incentive Plan

The KELTIP provides for the grant of units (“KELTIP Units”) to certain officers and key employees of the Company, which units will, once vested, entitle such officers and employees to receive an amount, in cash or in Company common stock issued pursuant to the Company’s Equity Plan, measured generally by the price of the Company’s common stock on the settlement date. KELTIP Units are not an actual equity interest in the Company and are solely unfunded and unsecured obligations of the Company that are not transferable and do not provide the holder with any stockholder rights. Payment of the settlement amount of vested KELTIP Units is deferred generally until the earlier of a change of control of the Company or the date the grantee ceases to serve as an officer or employee of the Company. The KELTIP Units are recorded as a liability, included in “Accounts payable and other accrued liabilities” in the Consolidated Balance Sheets (Note 10).

During the year ended December 31, 2018 the Company awarded 600,000 KELTIP Units to two officers of the Company and recorded approximately $0.3 million of compensation expense, included in “Stock based compensation” in the Consolidated Statement of Operations and Comprehensive Loss. At December 31, 2018 the KELTIP Units were marked-to-market and the Company recognized approximately a $0.3 million reduction of compensation expense for the year ended December 31, 2018. At December 31, 2018 1,620,000 KELTIP Units were outstanding.

During the year ended December 31, 2017 the Company awarded 435,000 KELTIP Units to two officers of the Company and recorded approximately $0.2 million of compensation expense, included in “Stock based compensation” in the Consolidated Statement of Operations and Comprehensive Loss. At December 31, 2017, the KELTIP Units were marked-to-market and the Company recognized approximately a $0.1 million reduction of compensation expense for the year ended December 31, 2017. At December 31, 2017 1,020,000 KELTIP Units were outstanding.

Common stock warrants

The following table summarizes the status of the Company’s common stock warrants at December 31, 2018 and December 31, 2017, and the changes during the years then ended:


	The Year Ended December 31,
	2018			2017
		Weighted			Weighted
	Number of	Average Exercise		Number of	Average Exercise
	Underlying	Price Per		Underlying	Price Per
Common Stock Warrants	Shares	Share		Shares	Share
Outstanding at beginning of period	11,478,172	$	0.81	17,578,950	$	2.17
Granted during period	—		—	—		—
Dilution adjustment	39,524		0.87	157,302		—
Expired during period	—		—	(6,258,080)		4.62
Exercised during period	—			—		—
Outstanding at end of period	11,517,696	$	0.81	11,478,172	$	0.81

The warrants relate to prior registered offerings and private placements of the Company’s stock. In September 2012, the Company closed on both a registered public offering and concurrent private placement with Sentient in which it sold units, consisting of one share of common stock and a five-year warrant to acquire one half of a share of common stock at an exercise price of $8.42 per share. A total of 3,431,649 warrant shares were issued and became exercisable on March 20, 2013 and expired on September 19, 2017, five years from the date of issuance.

In September 2014 the Company closed on both a registered public offering and concurrent private placement with Sentient in which it sold units, consisting of one share of common stock and a five-year warrant to acquire one half of a share of common stock at an exercise price of $1.21 per share. A total of 4,746,000 warrant shares were issued that became exercisable on March 11, 2015 and will expire on September 10, 2019, five years from the date of issuance.

In May 2016, the Company issued 8.0 million registered shares of common stock at a purchase price of $0.50 per share in a registered direct offering (the “Offering”) resulting in gross proceeds of $4.0 million. In connection with the Offering, each investor received an unregistered warrant to purchase three‐quarters of a share of common stock for each share of common stock purchased. The resulting 6,000,000 warrant shares have an exercise price of $0.75 per share, became exercisable on November 7, 2016 and will expire on November 6, 2021, five years from the initial exercise date.

The September 2012 and 2014 warrant agreements contain anti-dilution clauses that could result in a resetting of the warrant exercise price and the number of warrant shares outstanding in the event the Company were to issue additional shares of its common stock in a future transaction at an offering price lower than the current exercise price of the warrants. As a result of the subsequent issuance of the Company’s common stock in separate transactions, including the conversion of the Senior Secured Convertible Note which the Company entered into in October 2015 to borrow $5.0 million from Sentient, the Company’s largest stockholder, the May 2016 Offering and private placement, the ATM Program, the issuance of shares to Hecla in August 2017 and the Registered Purchase Agreement with LPC (discussed above), the exercise price of the 2012 and 2014 warrants has been adjusted downward. As a result of these transactions, the number of shares of common stock issuable upon exercise of the September 2012 warrants, prior to their expiration on September 19, 2017, had increased from the original 3,431,649 shares to 6,258,080 shares (2,826,431 share increase) and the exercise price had been reduced from the original $8.42 per share to $4.62 per share. The number of shares of common stock issuable upon exercise of the September 2014 warrants has increased from the original 4,746,000 shares to 5,517,696 shares (771,696 share increase) and the exercise price has been reduced from the original $1.21 per share to $0.85 per share.

The May 2016 warrants are not subject to anti-dilution and the warrants are recorded as equity. The September 2012 warrants expired during 2017, and because of a change in accounting principle, the September 2014 warrants were recorded in equity on the balance sheet at December 31, 2018 and December 31, 2017 (see Note 4).