Equity

3 Months Ended

Mar. 31, 2023

Equity

Equity

16. Equity

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).  On March 29, 2023, the Company filed a Prospectus Supplement increasing the total amount available to be sold under the ATM to $10.0 million in addition to the amounts previously sold.

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 between purchasers and during the period of distribution. Further, on March 29, 2023, the Company entered into a fourth amendment of the ATM Agreement which provides that Wainwright will be entitled to compensation for its services at a commission rate of up to 3.0% of the gross sales price per share of common stock sold under the ATM Agreement.

During the three months ended March 31, 2023, the Company sold an aggregate of 2,749,976 shares of common stock under the ATM Program at an average price of $0.27 per share of common stock for net proceeds, after commissions and fees, of approximately $701,000. Approximately $23,000 of deferred ATM Program costs were amortized during the quarter, and at March 31, 2023, there was a remaining balance of $21,000 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 three months ended March 31, 2022, the Company did not sell shares of common stock under the ATM Program. At March 31, 2022, there was a remaining balance of $70,000 of deferred ATM Program costs, recorded in “Prepaid expenses and other assets” on the Condensed Consolidated Balance Sheets.

As of March 31, 2023, there is approximately $10.0 million remaining available for issuance under the ATM Program based on a prospectus supplement filed with SEC on March 29, 2023.

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 at March 31, 2023, and the changes during the three months then ended:

		Weighted
		Average
		Grant Date
	Number of	Fair Value
Restricted Stock Grants	Shares	Per Share
Outstanding at beginning of period	495,002	$	0.44
Granted during the period	—		—
Restrictions lifted during the period	(33,335)		0.45
Forfeited during the period	—		—
Outstanding at end of period	461,667	$	0.44

For the three months ended March 31, 2023, the Company recognized approximately $33,000 of stock compensation expense related to the restricted stock grants and restrictions were lifted on the normal vesting of 33,335 shares granted to two 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 of the RSU grants issued to Directors of the Company under the Equity Plan, including awards to nonemployee directors under the Deferred Compensation Plan, at March 31, 2023, and the changes during the three months then ended:

		Weighted
		Average
		Grant Date
	Number of	Fair Value
Restricted Stock Units	Shares	Per Share
Outstanding at beginning of period	5,710,038	$	0.60
Granted during the period	—		—
Restrictions lifted during the period	—		—
Forfeited during the period	—		—
Outstanding at end of period	5,710,038	$	0.60

For the three months ended March 31, 2023, the Company recognized approximately $117,000 of stock compensation expense related to the restricted stock units.

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 March 31, 2023, and December 31, 2022.

During the three months ended March 31, 2023, the Company recognized approximately $39,000 of stock compensation expense related to the grants. There were 4,700,000 KELTIP Units outstanding at March 31, 2023, and December 31, 2022.

Common Stock Warrants

The following table summarizes the status of the Company’s common stock warrants at December 31, 2022, and March 31, 2023, and the changes during the three months then ended:

		Weighted
	Number of	Average
	Underlying	Exercise Price
Common Stock Warrants	Shares	Per Share
Outstanding at December 31, 2022	9,803,846	$	0.34
Granted during period	—		—
Exercised during period	—		—
Expired during period	—		—
Outstanding at March 31, 2023	9,803,846	$	0.34

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

All outstanding warrants are recorded in equity at March 31, 2023, and December 31, 2022, 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.