Annual report pursuant to Section 13 and 15(d)

Note 12 - Common Stock

v3.20.4
Note 12 - Common Stock
12 Months Ended
Dec. 31, 2020
Notes to Financial Statements  
Stockholders' Equity Note Disclosure [Text Block]
12.
Common Stock
 
Purchase Agreement with Lincoln Park Capital, LLC
 
On
June 8, 2020,
the Company entered into a purchase agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“LPC”), pursuant to which the Company has the right to sell to LPC, and LPC has committed to purchase from us, from time to time, up to
$10,000,000
of our common stock, subject to certain limitations, during the
30
months term of the Purchase Agreement.
 
On
June 9, 2020,
LPC purchased
52,500
shares of common stock at a price per share of
$6.50
(the “Initial Purchase Shares”) under the Purchase Agreement. Thereafter, under the Purchase Agreement, on any business day selected by us (the “Purchase Date”), the Company
may
direct LPC to purchase up to
25,000
shares of our common stock on such business day (each, a “Regular Purchase”), provided, however, that (i) the Regular Purchase
may
be increased to up to
30,000
shares, provided that the closing sale price of our common stock is
not
below
$10
on the Purchase Date and (ii) the Regular Purchase
may
be increased to up to
50,000
shares, provided that the closing sale price of our common stock is
not
below
$20
on the Purchase Date. In each case, LPC's maximum commitment in any single Regular Purchase
may
not
exceed
$1,000,000.
LPC has
no
right to require the Company to sell any shares of common stock to LPC, but LPC is obligated to make purchases as the Company directs, subject to certain conditions. The purchase price per share for each such Regular Purchase will be based off of prevailing market prices of our common stock immediately preceding the time of sale without any fixed discount. 
 
In addition to Regular Purchases described above, the Company
may
also direct LPC, on any business day following the date on which the Company has properly submitted a Regular Purchase notice directing LPC to purchase the maximum number of shares of our common stock that the Company is then permitted to include in a single Regular Purchase notice (the “Accelerated Purchase Date”), to purchase an additional amount of our common stock (an “Accelerated Purchase”),
not
to exceed the lesser of (i)
three
(
3
) times the number of shares purchased pursuant to such Regular Purchase, and (ii)
30%
of the trading volume on the Accelerated Purchase Date at a purchase price equal to the lesser of (a) the closing sale price on the Accelerated Purchase Date, and (b)
95%
of the Accelerated Purchase Date's volume weighted average price. The Company shall have the right in its sole discretion to set a minimum price threshold for each Accelerated Purchase.
 
Under certain circumstances and in accordance with the Purchase Agreement, the Company
may
direct LPC to purchase shares in multiple Accelerated Purchases on the same trading day, provided that all prior Accelerated Purchases (including those that have occurred earlier on the same day) have been completed and all of the shares to be purchased thereunder (and under the corresponding Regular Purchase) have been properly delivered to LPC in accordance with the Purchase Agreement. 
 
Other than as described above, there are
no
trading volume requirements or restrictions under the Purchase Agreement, and the Company will control the timing and amount of any sales of our common stock to LPC.
 
Transaction costs in connection with the Purchase Agreement with LPC totaled approximately
$494,000.
Included in these transaction costs was a commitment fee paid by the Company in the amount of
$325,000.
While this commitment fee relates to the entire offering and the purchases of common shares that will occur over time, the Company has recorded the entire commitment fee as issuance costs in additional paid-in capital at the time the commitment fee was paid because the offering has been consummated, and there is
no
guaranteed future economic benefit from this payment.
 
2019
Public Offering
 
In
November 2019,
the Company closed an underwritten public offering of units (the
“November 2019
Offering”) for gross proceeds of approximately
$11,500,000,
which included the full exercise of the underwriter's overallotment option to purchase additional shares and warrants. The net proceeds to the Company, after deducting underwriting discounts and commissions and other offering expenses and payable by the Company, were approximately
$9,922,000.
 
 
The offering comprised of: (
1
) Class A Units, priced at a public offering price of
$15.50
per unit, with each unit consisting of
one
share of common stock, a Series A warrant to purchase
one
share of common stock at an exercise price of
$15.50
per share that expires on the
first
anniversary of the date of issuance and a Series B warrant to purchase
one
share of common stock at an exercise price of
$15.50
per share that expires on the
fifth
anniversary of the issuance; and (
2
) Class B Units, priced at a public offering price of
$15.50
per unit, with each unit consisting of
one
share of Series A preferred stock, convertible into
one
share of common stock, a Series A warrant to purchase
one
share of common stock at an exercise price of
$15.50
per share that expires on the
first
anniversary of the date of issuance and a Series B warrant to purchase
one
share of common stock at an exercise price of
$15.50
per share that expires on the
fifth
anniversary of the issuance.
 
The securities comprising the units were immediately separable and were issued separately.
 
A total of
194,595
shares of common stock
547,341
shares of Series A preferred stock, Series A warrants to purchase up to
741,939
shares of common stock, and Series B warrants to purchase up to
741,939
shares of common stock were issued in the offering, including the full exercise of the over-allotment option.
 
As of
December 31, 2020,
all Series A convertible preferred stock had been converted into common stock. (See Note
11
– Preferred Stock.)
 
As of
December 31, 2020,
there are
no
Series A warrants remaining to purchase shares of common stock and Series B warrants to purchase a total of
325,632
 shares of common stock still remaining and outstanding. (See “Warrants for Common Stock” below.)
 
ATM Equity Offerings
 
Through the
August 2019
ATM Facility, the Company
may
offer and sell, from time-to-time, up to
$6,760,000
aggregate offering price of shares of its common stock”). The Company's offering of
$6,760,000
of its common stock under the
August 2019
ATM Facility was completed in late
September 2019.
During the year ended
December 31, 2019,
the Company sold
100,423
shares of common stock under the
August 2019
ATM Facility for net proceeds, after deducting sales commissions and other offering costs, of approximately
$6,322,000.
As of
December 31, 2019,
the Company had
no
remaining capacity to issue shares under the
August 2019
ATM Facility. 
 
In
August 2019,
the Company terminated the
November 2017
ATM Facility under which the Company could offer and sell, from time-to-time, up to
$25,000,000
aggregate offering price of shares of its common stock. During the year ended
December 31, 2019,
the Company sold
zero
shares of common stock under the
November 2017
ATM Facility.
 
Restricted Common Shares
 
The activity of restricted common shares for the year ended
December 31, 2020
is described as follows:
 
In
March 2020,
the Company issued
2,832
restricted shares of its common stock at an aggregate value of approximately
$24,000.
 
In
June 2020,
the Company issued
3,453
restricted shares of its common stock at an aggregate value of approximately
$25,000.
 
In
September 2020,
the Company issued
4,709
restricted shares of its common stock at an aggregate value of approximately
$25,000.
 
The activity of restricted common shares for the year ended
December 31, 2019
is described as follows:
 
In
March 2019,
the Company issued
28
restricted shares of its common stock at an aggregate value of approximately
$25,000.
 
In
October 2019,
the Company issued
774
restricted shares of its common stock at an aggregate value of approximately
$25,000.
 
In
December 2019,
the Company issued
3,068
restricted shares of its common stock at an aggregate value of approximately
$25,000.
 
Warrants for Common Stock
 
As of
December 31, 2020,
outstanding warrants to purchase shares of common stock were as follows: 
 
           
 
 
 
 
Number of
 
           
 
 
 
 
Shares
 
           
 
 
 
 
Outstanding
 
   
Exercisable
 
Expiration
 
Exercise
   
Under
 
Issuance Date
 
for
 
Date
 
Price
   
Warrants
 
                         
February 2015
 
Common Shares
 
February 17, 2025
  $
4,000.00
     
79
 
March 2015
 
Common Shares
 
March 26, 2025
  $
2,720.00
     
2
 
May 2015
 
Common Shares
 
May 12, 2025
  $
4,240.00
     
37
 
December 2015
 
Common Shares
 
December 16, 2025
  $
5,600.00
     
31
 
April 2016
 
Common Shares
 
April 1, 2026
  $
6,080.00
     
25
 
May 2016
 
Common Shares
 
May 11, 2021
  $
7,740.00
     
6
 
June 2016
 
Common Shares
 
June 20, 2026
  $
4,980.00
     
101
 
May 2017
 
Common Shares
 
May 25, 2027
  $
9,500.00
     
223
 
November 2019
 
Common Shares
 
November 26, 2024
  $
6.10
     
325,632
 
November 2019
 
Common Shares
 
November 26, 2024
  $
18.36
     
989,379
 
April 2020
 
Common Shares
 
April 21, 2025
  $
6.37
     
413,210
 
   
 
 
 
   
 
     
1,728,725
 
 
As of
December 31, 2019,
outstanding warrants to purchase shares of common stock were as follows: 
 
           
 
 
 
 
Number of
 
           
 
 
 
 
Shares
 
           
 
 
 
 
Outstanding
 
   
Exercisable
 
Expiration
 
Exercise
   
Under
 
Issuance Date
 
for
 
Date
 
Price
   
Warrants
 
                         
February 2015
 
Common Shares
 
February 17, 2025
  $
4,000.00
     
79
 
March 2015
 
Common Shares
 
March 26, 2025
  $
2,720.00
     
2
 
May 2015
 
Common Shares
 
May 12, 2025
  $
4,240.00
     
37
 
May 2015
 
Common Shares
 
May 17, 2020
  $
4,240.00
     
22
 
December 2015
 
Common Shares
 
December 16, 2025
  $
5,600.00
     
31
 
April 2016
 
Common Shares
 
April 1, 2026
  $
6,080.00
     
25
 
May 2016
 
Common Shares
 
May 11, 2021
  $
7,740.00
     
6
 
June 2016
 
Common Shares
 
June 20, 2026
  $
4,980.00
     
101
 
May 2017
 
Common Shares
 
May 25, 2027
  $
9,500.00
     
223
 
November 2019
 
Common Shares
 
November 26, 2020
  $
18.36
     
989,379
 
November 2019
 
Common Shares
 
November 26, 2024
  $
15.50
     
741,940
 
November 2019
 
Common Shares
 
November 26, 2024
  $
15.50
     
741,940
 
   
 
 
 
   
 
     
2,473,785
 
 
In connection with the
November 2019
Offering, Series A warrants to purchase up to
741,939
shares of common stock, and Series B warrants to purchase up to
741,939
shares of common stock were issued in the offering. A Series A warrant to purchase
one
share of common stock at an exercise price of
$15.50
per share that expires on the
first
anniversary of the date of issuance and a Series B warrant to purchase
one
share of common stock at an exercise price of
$15.50
per share that expires on the
fifth
anniversary of the issuance. The Series A warrants to purchase
one
share of common stock have a contractual term of
one
year and an exercise price of
$15.50
per share. The Series B warrants to purchase
one
share of common stock have a contractual term of
five
years and an exercise price of
$15.50
per share. The Company determined the fair value of the Series A warrants on the date of issuance to be approximately
$1,210,000
using the Black-Scholes option pricing model. Assumptions used were dividend yield of
0%,
volatility of
91.1%,
risk free interest rate of
1.59%
and a contractual life of
one
year. The Company determined the fair value of the Series B warrants on the date of issuance to be approximately
$2,871,000
using the Black-Scholes option pricing model. Assumptions used were dividend yield of
0%,
volatility of
68.8%,
risk free interest rate of
1.58%
and a contractual life of
five
years. The fair value of the Series A and B warrants totaling approximately
$4,081,000
is recorded as issuance costs relating to
November 2019
Offering.
 
In
February 2020,
a total of
102,626
shares of common stock were issued in connection with the exercise of Series A warrants for gross proceeds of approximately
$1,591,000,
and a total of
4,548
shares of common stock were issued in connection with the exercise of Series B warrants for gross proceeds of approximately
$70,000.
 
 
On
April 15, 2020,
the Company reduced the exercise price of the outstanding Series A warrants and Series B warrants from
$15.50
per share to
$6.10
per share. The Series A and B warrant exercise price adjustment to
$6.10
per share from
$15.50
per share resulted in the recognition of a modification expense on
April 15, 2020,
under the analogous guidance with respect to stock option modification under FASB ASC Topic
718,
Stock-Based Compensation (ASC
718
), wherein an exchange of warrants is deemed to be a modification of the initial warrant agreement by the replacement with a revised warrant agreement, requiring the incremental fair value, measured as the difference between the fair value immediately after the modification as compared to the fair value immediately before the modification, to the extent an increase, recognized as a modification expense. In this regard, the Series A warrants and Series B warrants exercise price adjustment resulted in the recognition of a current period modification expense of
$1,838,000
included in other income (expense) in the consolidated statement of operations, with a corresponding increase to additional paid-in capital in the consolidated balance sheet. The modification expense incremental fair value was estimated using a Black-Scholes valuation model, using the following assumptions:
 
   
Immediately
   
Immediately
 
   
before Modification
   
After Modification
 
                 
Exercise price
  $
15.50
    $
6.10
 
Common stock price
  $
6.30
    $
6.30
 
Expected term (in years)
   
2.8
     
2.8
 
Average volatility
   
97
%    
97
%
Risk-free interest rate
   
0.27
%    
0.27
%
Dividend yield
   
0
%    
0
%
 
On
April 16, 2020,
the Company entered into inducement letter agreements with certain institutional and accredited holders of Series A warrants and Series B warrants pursuant to which such holders agreed to exercise Series A warrants to purchase
482,059
shares of common stock and Series B warrants to purchase
24,279
shares of common stock for aggregate exercise proceeds to the Company of approximately
$3,089,000.
 
In conjunction, the Company also agreed to issue new Series A-
2
warrants to purchase up to
482,059
shares of common stock as an inducement for the exercise of Series A warrants, and new Series B-
2
warrants to purchase up to
24,279
shares of common stock as an inducement for the exercise of Series B warrants, in each case at an exercise price of
$6.371
per share and for a term of
five
years. The Company determined the fair value of the Series A-
2
and the Series B-
2
warrants on the date of issuance to be approximately
$1,838,000
using the Black-Scholes option pricing model. Assumptions used were dividend yield of
0%,
volatility of
84.1%,
risk free interest rate
of.35%
and a contractual life of
five
years. The fair value of the Series A-
2
and B-
2
warrants is recorded as a cost of issuance of the offering and as additional paid-in capital. The transaction closed on
April 20, 2020.
Other transaction costs in connection with the
2020
Warrant Offering were approximately
$334,000.
 
In
May 2020,
a total of
410
shares of common stock were issued in connection with the exercise of Series A warrants for gross proceeds of approximately
$2,000.
 
In
June 2020,
a total of
2,761
shares of common stock were issued in connection with the exercise of Series A warrants for gross proceeds of approximately
$17,000,
and a total of
5,070
shares of common stock were issued in connection with the exercise of Series B warrants for gross proceeds of approximately
$31,000.
 
 
In
August 2020,
a total of
111,704
shares of common stock were issued in connection with the exercise of Series A warrants for gross proceeds of approximately
$681,000,
and a total of
380,913
shares of common stock were issued in connection with the exercise of Series B warrants for gross proceeds of approximately
$2,324,000.
 
In
August 2020,
a total of
89,230
shares of common stock were issued in connection with the exercise of Series A-
2
warrants for gross proceeds of approximately
$568,000,
and a total of
3,899
shares of common stock were issued in connection with the exercise of Series B-
2
warrants for gross proceeds of approximately
$25,000.
 
In
September 2020,
a total of
1,500
shares of common stock were issued in connection with the exercise of Series B warrants for gross proceeds of approximately
$9,000.
 
As of
December 31, 2020,
there were
no
Series A warrants remaining to purchase shares of common stock and Series B warrants to purchase a total of
325,632
shares of common stock still remaining and outstanding.
 
As of
December 31, 2020,
there were Series A-
2
warrants to purchase a total of
392,830
shares of common stock, and Series B-
2
warrants to purchase a total of
20,380
shares of common stock still remaining and outstanding.
 
In connection with the CRG Debt Conversion, CRG received warrants exercisable for
989,379
shares of common stock, an amount equal to
15%
of our common stock on a fully diluted basis after taking the
November 2019
Offering into account (the “CRG Warrants”). The CRG Warrants have a contractual term of
five
years and an exercise price equal to
120%
of the Series B convertible preferred stock conversion price of
$15.30
or
$18.36
per share. The Company determined the fair value of the warrants on the date of issuance to be approximately
$3,502,000
using the Black-Scholes option pricing model. Assumptions used were dividend yield of
0%,
volatility of
68.8%,
risk free interest rate of
1.58%
and a contractual life of
five
years. The fair value of the CRG warrants is recorded as additional paid-in capital as part of the accounting for the debt conversion.
 
In connection with the
2017
Loan Agreement, the Company issued warrants to purchase a total of
223
shares of common stock at an exercise price of
$9,500.00
per share. The warrants have a contractual life of
ten
years and are exercisable immediately in whole or in part. The Company determined the fair value of the warrants on the date of issuance to be
$940,000
using the Black-Scholes option pricing model. Assumptions used were dividend yield of
0%,
volatility of
55.1%,
risk free interest rate of
2.25%
and a contractual life of
ten
years. The fair value of the warrants along with financing and legal fees totaling
$790,000,
are recorded as debt issuance costs and presented in the consolidated balance sheets as a deduction from the carrying amount of the note payable. The debt issuance costs are amortized to interest expense over the loan term. During the years ended
December 31, 2020
and
2019,
the Company recorded
$3,000
and
$352,000,
respectively, of interest expense relating to the debt issuance costs using the effective interest method. As of
December 31, 2020,
the unamortized debt discount was
$9,000.
 
During the year ended
December 31, 2020,
a total of
1,209,000
shares were issued in connection with the exercise of warrants for gross proceeds of approximately
$8,407,000.
No
shares were issued in connection with the exercise of warrants during the year ended
December 31, 2019.
 
No
shares issuable pursuant to warrants have been cancelled during the year ended
December 31, 2020
and
2019.
 
A total of
42,404
shares issuable pursuant to warrants expired during the year ended
December 31, 2020.
A total of
140
shares issuable pursuant to warrants expired during the year ended
December 31, 2019.