Equity

12 Months Ended

Dec. 31, 2022

Equity

Equity

16. Equity

Registered direct purchase agreement, 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 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, had 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. The Commitment Purchase Agreement expired in May 2021.

The Company did not sell any shares of common stock to LPC under the Commitment Purchase Agreement in the years ended December 31, 2022 or 2021. With the May 2021 expiration of the agreement, the Company wrote off the remaining balance of $352,000 of deferred LPC Program costs to “Interest and Other Expense” on the Consolidated Statement of Operations.

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. On December 11, 2020 the Company entered into a third amendment of the ATM Agreement further extending the agreement so that it will remain in full force and effect until such time as the ATM Agreement is terminated in accordance with certain other terms therein or upon mutual agreement by the parties, and to reflect a new registration statement on Form S-3 (No. 333-249218).

Under the ATM, the common stock is 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.

During the year ended December 31, 2022, the Company sold an aggregate of 2,780,861 shares of common stock under the ATM Program at an average price of $0.28 per share of common stock for net proceeds, after commissions and fees, of approximately $754,000. Approximately $25,000 of deferred ATM Program costs were amortized during the year, and at December 31, 2022, there was a remaining balance of $45,000 of the current portion of deferred ATM Program costs, recorded in “Prepaid expenses and other assets” on the Consolidated Balance Sheet (see Note 6).

During the year ended December 31, 2021, the Company sold an aggregate of 1,856,960 shares of common stock under the ATM Program at an average price of $0.97 per share of common stock for net proceeds, after commissions and fees, of approximately $1.8 million. Also, approximately $57,000 of deferred ATM Program costs were amortized. At December 31, 2021, there was a remaining balance of $70,000 of long-term deferred ATM Program costs, recorded in “Other long-term assets” on the Consolidated Balance Sheet (see Note 10).

As of December 31, 2022, there is approximately $1.1 million remaining available for issuance under the ATM Program based on a prospectus supplement filed with SEC on December 11, 2020.

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.

Restricted Stock Grants

The following table summarizes the status and activity of the Company’s restricted stock grants issued under the Equity Plan:

	The Year Ended December 31,
	2022			2021
		Weighted			Weighted
		Average			Average
		Grant Date			Grant Date
	Number of	Fair Value		Number of	Fair Value
Restricted Stock Grants	Shares	Per Share		Shares	Per Share
Outstanding at beginning of period	293,334	$	0.61	224,002	$	0.36
Granted during the period	550,000		0.38	335,000		0.67
Restrictions lifted during the period	(348,332)		0.49	(265,668)		0.47
Forfeited during the period	—		—	—		—
Outstanding at end of period	495,002	$	0.44	293,334	$	0.61

During the year ended December 31, 2022, the Company recognized approximately $207,000 of stock compensation expense related to the restricted stock grants. The Company expects to recognize additional stock compensation expense related to these awards of approximately $117,000 over the next 33 months. During the year ended December 31, 2022, 500,000 shares were granted to nine 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. Also, during the year ended December 31, 2022, 50,000 shares were granted to a new employee, with one-third of the shares vesting equally on the first, second and third anniversaries of the grant date. During the period, restrictions were lifted on the normal vesting of 181,666 shares granted to nine employees in prior years.

During the year ended December 31, 2021, the Company recognized approximately $165,000 of stock compensation expense related to the restricted stock grants. During the year ended December 31, 2021, 335,000 shares were granted to nine employees, with one-third of the grants (111,666 shares) vesting on the grant date and the remaining shares vesting equally on the first and second anniversaries of the grant date. Also, during the period, restrictions were lifted on the normal vesting of 154,002 shares granted to six employees in prior years.

Restricted Stock Units

The Equity Plan permits the Company to issue Restricted Stock Units (“RSUs”), which entitle each recipient to receive one unrestricted share of common stock upon termination of the recipient’s employment or board service. 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, non-employee directors, and employees as allowed by the Equity Plan, receive a portion of their compensation in the form of RSUs issued under the Equity Plan. The RSUs generally vest on the first anniversary of the grant.

The following table summarizes the status and activity of the RSU grants issued to Directors of the Company under the Equity Plan, including awards to non-employee directors under the Deferred Compensation Plan:

	The Year Ended December 31,
	2022			2021
		Weighted			Weighted
		Average			Average
		Grant Date			Grant Date
	Number of	Fair Value		Number of	Fair Value
Restricted Stock Units	Shares	Per Share		Shares	Per Share
Outstanding at beginning of period	4,010,038	$	0.69	3,610,038	$	0.70
Granted during the period	1,700,000		0.40	400,000		0.60
Restrictions lifted during the period	—		—	—		—
Forfeited during the period	—		—	—		—
Outstanding at end of period	5,710,038	$	0.60	4,010,038	$	0.69

During the year ended December 31, 2022, the Company recognized approximately $361,000 of total stock compensation expense related to the RSUs.

During the year ended December 31, 2022, the Company granted each non-employee Director 100,000 RSUs, and recognized approximately $249,000 of stock compensation expense related to the Director grants. The Company expects to recognize additional stock compensation expense related to the non-employee Director RSU grants of approximately $112,000 over the next 6 months.

Included in the grants shown in the table during the period is a grant by the Company to its CEO of 1,000,000 RSUs. One-half of the RSUs vest on each of the first and second anniversaries of the grant. The Company recognized approximately $112,000 of stock compensation expense related to the grant during the year ended December 31, 2022. The Company expects to recognize additional stock compensation expense related to the CEO RSU grants of approximately $288,000 over the next 33 months.

During the year ended December 31, 2021, the Company recognized approximately $305,000 of total stock compensation expense related to the RSUs.

During the year ended December 31, 2021, each of the six board members were granted 50,000 RSUs that vest one year from the grant date. During December 2021, a new director was granted 100,000 RSUs with 66,667 vesting on the grant date and the remaining 33,333 vesting one year from the grant date.

In addition, during the year ended December 31, 2021, the Company granted a consultant 100,000 RSUs and recognized $67,000 of stock compensation expense. The RSUs vested on the grant date and each vested RSU entitles the consultant to receive one unrestricted share of common stock upon termination of the consulting agreement with the Company. The consultant RSUs are not included in the Directors table above.

Key Employee Long-Term Incentive Plan

The Company’s 2013 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 (such method of settlement at the sole discretion of the Board of Directors) 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 Company intends to settle all the KELTIP Units in common stock of the Company, an option that the Board of Directors holds in its sole discretion so long as sufficient shares remain available under the Equity Plan. As a result, all outstanding KELTIP Units are recorded in equity at December 31, 2022 and 2021.

During the year ended December 31, 2022, the Company granted 950,000 KELTIP Units to two officers of the Company and recognized approximately $176,000 of stock compensation expense related to the grants. Also, during the year ended December 31, 2022, an officer of the Company retired and was issued 1,123,380 shares of the Company’s common stock net of 456,620 shares relinquished to cover withholding taxes. The shares issued were in settlement of previously granted KELTIP Units.

During the year ended December 31, 2021, the Company granted 1,605,000 KELTIP Units to two officers of the Company and recognized approximately $1.1 million of stock compensation expense related to the grants.

There were 4,700,000 and 5,330,000 KELTIP Units outstanding at December 31, 2022 and 2021, respectively.

Common Stock Warrants

The following table summarizes the status and activity of the Company’s common stock warrants:

		Weighted
	Number of	Average
	Underlying	Exercise Price
Common Stock Warrants	Shares	Per Share
Outstanding at December 31, 2020	17,403,846	$	0.38
Exercised during period
July 2019 Series A warrants	(200,000)		0.35
July 2019 Series B warrants	(1,500,000)		0.35
April 2020 Series A warrants	(1,400,000)		0.30
Expired during period
May 2016 warrants	(1,500,000)		0.75
Outstanding at December 31, 2021	12,803,846	$	0.34
Exercised during period
July 2019 Series B warrants	(3,000,000)		0.35
Outstanding December 31, 2022	9,803,846	$	0.34

The warrants relate to prior registered offerings and private placements of the Company’s stock.

On April 20, 2020, the Company entered into a securities purchase agreement with certain institutional investors providing for the issuance and sale of 15,000,000 shares of the Company’s common stock and in a concurrent private placement transaction, the issuance of an aggregate of 11,250,000 warrants, ultimately consisting of 7,500,000 series A warrants and 3,750,000 series B warrants. During the year ended December 31, 2021, 1,400,000 series A warrants were exercised, for net proceeds of $0.4 million, leaving a balance of 1,100,000 and 250,000 series A and series B warrants outstanding, respectively, as of December 31, 2022 and 2021.

On July 17, 2019, the Company issued 8,653,846 registered shares of common stock in a registered direct offering. In connection with the offering, each investor received an unregistered Series A warrant to purchase a share of common stock for each share of common stock purchased. Each Series A warrant is exercisable six months from the date of issuance and has a term expiring in January 2025. During the year ended December 31, 2021, 200,000 series A warrants were exercised, for net proceeds of $0.1 million, leaving a balance of 8,453,846 series A warrants outstanding as of December 31, 2022 and 2021.

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 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 had an exercise price of $0.75 per share, became exercisable on November 7, 2016, and were exercisable until November 6, 2021, five years from the initial exercise date.

In connection with the July 2019 registered direct offering noted above, the Company also agreed to exchange, on a one-for-one basis, 4,500,000 of the May 2016 warrants for Series B warrants to purchase 4,500,000 shares of common stock at an exercise price of $0.35 per share. Each Series B warrant was exercisable six months from the date of issuance and had a term expiring in May 2022. During the year ended December 31, 2021, 1,500,000 of the series B warrants were exercised, for net proceeds of $0.5 million, leaving a balance of 3,000,000 series B warrants outstanding. During the year

ended December 31, 2022, the remaining balance of 3,000,000 of the series B warrants were exercised, for net proceeds of $1.1 million. The remaining 1,500,000 warrants from the May 2016 offering that were not exchanged in the July 2019 registered direct offering expired on November 6, 2021.

All outstanding warrants are recorded in equity at December 31, 2022 and December 31, 2021 following the guidance established by ASC Topic 815-40. The Company’s warrants allow for the potential settlement in cash if certain extraordinary events are affected by the Company, including a 50% or greater change of control in the Company’s common stock. Since those events have been deemed to be within the Company’s control, the Company continues to apply equity treatment for these warrants.