Annual report pursuant to Section 13 and 15(d)

Stockholders' (Deficit) Equity

v3.20.4
Stockholders' (Deficit) Equity
12 Months Ended
Dec. 31, 2020
Equity [Abstract]  
Stockholders' (Deficit) Equity Stockholders’ (Deficit) Equity
Initial Public Offering
On February 19, 2019, the Company consummated its initial public offering (“IPO”), selling a total of 2,172,591 shares of common stock at a purchase price of $5.00 per share for gross proceeds of $10.9 million and net proceeds of $9.7 million. In connection with the closing of the IPO, convertible notes (and related accrued interest) of $11.8 million were converted into 6,825,391 shares of common stock, accrued dividends of $4.8 million were converted into 954,696 shares of common stock, and preferred stock, both Series A and Series B, were converted into 2,534,766 shares of common stock. In addition, 127,500 shares of unvested restricted stock grants were immediately vested upon the completion of the IPO. Total shares of common stock outstanding at the closing of the IPO amounted to 14,613,000. Upon the closing of the IPO, certain notes were to be automatically converted according to their terms into the Company’s common stock to the extent allowed; notes were not permitted to convert to the extent that the holders or any of its affiliates would beneficially own in excess of
4.99% of the Company’s common stock after such conversion. Due to this 4.99% limitation, principal representing $47.8 thousand of these notes remained outstanding and were converted into 273,034 shares of the Company's common stock in August and September 2019 when the conversion did not result in the holders and any of its affiliates to own more than 4.99% of the Company's outstanding common shares.
PIPE Offerings
On June 16, 2019, the Company entered into a private offering with certain institutional and accredited investors for the sale by the Company in a private placement of 675,000 units (each a “June Unit”) issued at $14.00 per June Unit for total gross proceeds of $9.5 million. Each June Unit consisted of (i) one share of its common stock, and (ii) a warrant to purchase 0.7 shares (a total of 472,500) of common stock (each a “June Warrant”) (collectively, "June PIPE"). The June Warrants included in the June Units are exercisable at a price of $16.00 per share commencing on the date of issuance and will expire on August 23, 2024. On July 1, 2019, the Company filed a Registration Statement on Form S-1 to register for resale the common stock underlying the June Units sold with the Company's June 2019 private offering. The Company's net proceeds from the closing of the sale of the June Units on June 19, 2019 were $8.6 million after deducting the placement agent fees and offering expenses payable by the Company.

On October 10, 2019, the Company entered into a second private placement of 485,250 units (each an “October Unit”) issued at $12.88 per October Unit for total gross proceeds of $6.3 million. Each October Unit consisted of (i) one share of the Company’s common stock, and (ii) a warrant to purchase 1.1 shares (a total of 533,775) of common stock (each an “October Warrant”) (collectively, "October PIPE"). The October Warrants included in the October Units are exercisable at a price of $12.88 per share commencing on the date of issuance and will expire on October 10, 2024. On November 8, 2019, the Company filed a Registration Statement on Form S-1 to register for resale the common stock underlying the October Units sold with the Company's October 2019 private offering. The Company's net proceeds from the closing of the sale of the October Units on October 11, 2019 were $5.7 million after deducting the placement agent fees and offering expenses payable by the Company.
Public Offering
On June 30, 2020, the Company completed its June 2020 Common Stock Offering (the "June 2020 Offering") of 4,216,868 shares of common stock for total gross proceeds of $35.0 million. The shares of Company common stock were sold at a public offering price of $8.30 per share and were purchased by the underwriters from the Company at a price of $7.719 per share. Net proceeds from the sale of the common stock on June 30, 2020 were $32.0 million after deducting underwriting discounts and offering expenses.
2018 Stock Plan
In June 2018, the Company’s Board and stockholders adopted the 2018 Stock Plan. The 2018 Stock Plan is designed to enable the Company to offer employees, officers, directors and consultants, as defined, an opportunity to acquire a proprietary interest in the Company. The types of awards that may be granted under the 2018 Stock Plan include stock options, stock appreciation rights, restricted stock, and other stock-based awards subject to limitations under applicable law. All awards are subject to approval by the Company’s Board. The 2018 Stock Plan reserves shares of common stock for issuance in accordance with the 2018 Stock Plan’s terms. Total number of shares reserved and available for issuance under the plan is 4,150,000 shares. As of December 31, 2020, 45,450 shares remained available for grant under the 2018 Stock Plan.
Restricted Stock
Restricted stock activity for the years ended December 31, 2020 and 2019 is summarized as follows:
Number of Shares Weighted-Average Grant Date Fair Value
Unvested at December 31, 2018
127,500  $ 3.21 
  Granted 200,000  11.54 
  Vested (169,164) 5.26 
Unvested at December 31, 2019
158,336  $ 11.54 
  Granted 200,000  7.16 
  Vested (49,992) 11.54 
Unvested at December 31, 2020
308,344  $ 8.70 
On May 8, 2019, the Company granted and issued 200,000 shares of restricted common stock to three consultants in connection with the provision of services pursuant to agreements entered into in April 2019. The consultants were each accredited investors. 25,000 shares vested within 4 months of the approval date of the agreement. The remaining 175,000 shares vest over 42 months, beginning on September 19, 2019. As of December 31, 2020, 91,656 shares have vested and 108,344 remain unvested.
On October 30, 2020, the Company granted 200,000 shares of restricted common stock to the Company's Chief Executive Officer in connection with his employee agreement. The shares vest 25% on each anniversary date of the agreement, as long as the executive remains employed with the Company and fully vest upon a change of control. As of December 31, 2020, 200,000 shares remain unvested.

During the years ended December 31, 2020 and 2019, the Company recorded $0.6 million and $0.9 million, respectively, in stock-based compensation for the restricted shares previously issued.

As of December 31, 2020, there was $2.5 million of unrecognized stock-based compensation expense related to restricted shares with a weighted-average remaining expense period of 3.31 years.

Stock Options
The following table summarizes stock option activities for the years ended December 31, 2020 and 2019:
Number of
Shares
Weighted
Average
Exercise Price
Weighted
Average
Remaining Life
(in Years)
Aggregate
Intrinsic Value
Outstanding, December 31, 2018
2,235,000  $ 1.74  9.44 $ 23,100 
  Granted 648,550  6.03  —  — 
Outstanding, December 31, 2019
2,883,550  2.70  8.62 $ 23,861,981 
  Granted 1,036,000  9.38  —  — 
Outstanding, December 31, 2020
3,919,550  $ 4.47  8.11 $ 13,095,054 
Exercisable, December 31, 2020
1,627,425 $ 2.47  7.59 $ 8,696,368 

During the year ended December 31, 2020, the Company granted certain individuals options to purchase 1,036,000 shares of common stock with an average exercise price of $9.38 per share, with contractual terms ranging from 1 to 10 years, and vesting periods that include 8.33% monthly over 1 year, 100% on 1 year anniversary date and 25% per year over 4 years. The options have an aggregate grant date fair value of $7.0 million that was calculated using the Black-Scholes option pricing model. Variables used in the Black-Scholes option pricing model include: (1) discount rates ranging from 0.1% to 1.6% based on the daily yield curve rates for U.S. Treasury obligations, (2) expected lives ranging from 5.50 years to 6.25 years based on
the simplified method (vesting plus contractual term divided by two), (3) expected volatility ranging from 83.1% to 83.4% based on the historical volatility of comparable companies' stock, (4) no expected dividends and (5) fair values of the Company's stock ranging from $6.44 to $13.50 per share.
In January 2019, certain individuals agreed to the extinguishment of $0.5 million in deferred compensation, including $0.4 million for individuals still with the Company, that had been earned through September 30, 2018 and was to be repaid out of the proceeds from the Company's IPO. In recognition of this extinguishment of deferred compensation, during the three months ended March 31, 2019, the Company granted these individuals options to purchase 401,750 shares of the Company’s common stock with an exercise price of $1.75 per share, for a term of 10 years, and a vesting period of 25% per quarter over one year. The options have an aggregated grant date fair value of $0.5 million that was calculated using the Black-Scholes option pricing model. Variables used in the Black-Scholes option pricing model include: (1) discount rate of 2.53% based on the daily yield curve rates for U.S. Treasury obligations, (2) expected life of 5.27 years based on the simplified method (vesting plus contractual term divided by two), (3) expected volatility of 84.3% based on the historical volatility of comparable companies' stock, (4) no expected dividends and (5) fair market value of the Company's stock at $1.67 per share which value was determined by the Company's Board after reviewing and considering, among other factors, a valuation report issued by an independent appraisal firm.
In addition, during the year ended December 31, 2019, the Company granted certain individuals options to purchase 246,800 shares of the Company’s common stock with an average exercise price of $13.00 per share, for a term of 10 years, and a vesting period ranging from one year to 25% per year over four years. The options have an aggregated grant date fair value of $2.8 million that was calculated using the Black-Scholes option pricing model. Variables used in the Black-Scholes option pricing model include: (1) discount rates ranging from 1.65% to 2.12% based on the daily yield curve rates for U.S. Treasury obligations, (2) expected lives ranging from 5.50 to 6.25 years based on the simplified method (vesting plus contractual term divided by two), (3) expected volatility ranging from 82.99% to 85.06% based on the historical volatility of comparable companies' stock, (4) no expected dividends and (5) fair market value of the Company's stock ranging from $5.73 to $17.50 per share.
All options issued and outstanding are being amortized over their respective vesting periods. During the years ended December 31, 2020 and 2019, the Company recorded $2.6 million and $1.6 million, respectively, of stock-based compensation expense for options. The unrecognized stock-based compensation expense at December 31, 2020 was $7.9 million with a weighted-average remaining expense period of 2.39 years.
Warrants
In January and February 2019, the Company issued warrants to purchase 300,000 shares of common stock at an exercise price of $1.75 on various dates. The warrants were issued to investors in connection with debt issued prior to the IPO and resulting settlements of debt.
On February 19, 2019, the Company issued warrants to the underwriters of the Company's IPO to purchase 152,081 shares of common stock at an exercise price of $6.00. The warrants expire five years from the date of issuance.
The total grant date fair value of the 452,081 warrants was $0.8 million, which was determined utilizing the Black-Scholes option pricing model. Variables used in the Black-Scholes option pricing model include (1) discount rates in the range of 2.47% to 2.80% based on the daily yield curve rates for U.S. Treasury obligations, (2) expected term of five years based on the term of the warrants, (3) expected volatilities of 84.09% to 84.45% based on the historical volatility of comparable companies' stock, (4) no expected dividends, and (5) fair value of the Company's stock at $1.67 per share for warrants issued prior to the IPO, a value determined by the Company's Board after reviewing and considering, among other factors, a valuation report issued by an independent appraisal firm, or the fair market value of the Company's stock at the closing of its' IPO on February 19, 2019 of $4.87 for warrants on that day.

As a result of the Company’s IPO closing on February 19, 2019, $0.7 million of unamortized issuance costs were accelerated and recorded as expense, including $0.1 million for costs associated with convertible notes, $0.1 million for warrants issued in connection with the convertible notes and $0.5 million for warrants issued in connection with non-convertible notes issued prior to the IPO. Warrants issued to underwriters in connection with the IPO were treated as deal costs.

On June 16, 2019, the Company entered into a private offering with certain institutional and accredited investors for the sale by the Company in a private placement of 675,000 units (each a “June Unit”) issued at $14.00 per June Unit for total gross proceeds of $9.5 million. Each June Unit consisted of (i) one share of its common stock, and (ii) a warrant to purchase 0.7 shares (a total of 472,500) of common stock (each a “June Warrant”) (collectively, "June PIPE"). The June Warrants included in the June Units are exercisable at a price of $16.00 per share commencing on the date of issuance and will expire on
August 23, 2024. On July 1, 2019, the Company filed a Registration Statement on Form S-1 to register for resale the common stock underlying the June Units sold with the Company's June 2019 private offering. The Company's net proceeds from the closing of the sale of the June Units on June 19, 2019 were $8.6 million after deducting the placement agent fees and offering expenses payable by the Company.

The grant date fair value of the 472,500 June Warrants was $4.4 million, which was determined utilizing the Black-Scholes option pricing model. Variables used in the Black-Scholes option pricing model include (1) discount rate of 1.85% based on the daily yield curve rates for U.S. Treasury obligations, (2) expected term of five years based on the term of the warrants, (3) expected volatility of 84.94% based on the historical volatility of comparable companies' stock, (4) no expected dividends, and (5) fair value of the Company's stock at $14.30 per share.

On October 10, 2019, the Company entered into a second private placement of 485,250 units (each an “October Unit”) issued at $12.88 per October Unit for total gross proceeds of $6.3 million. Each October Unit consisted of (i) one share of the Company’s common stock, and (ii) a warrant to purchase 1.1 shares (a total of 533,775) of common stock (each an “October Warrant”) (collectively, "October PIPE"). The October Warrants included in the October Units are exercisable at a price of $12.88 per share commencing on the date of issuance and will expire on October 10, 2024. On November 8, 2019, the Company filed a Registration Statement on Form S-1 to register for resale the common stock underlying the October Units sold with the Company's October 2019 private offering. The Company's net proceeds from the closing of the sale of the October Units on October 11, 2019 were $5.7 million after deducting the placement agent fees and offering expenses payable by the Company.

The grant date fair value of the 533,775 October Warrants was $4.5 million, which was determined utilizing the Black-Scholes option pricing model. Variables used in the Black-Scholes option pricing model include (1) discount rate of 1.59% based on the daily yield curve rates for U.S. Treasury obligations, (2) expected term of five years based on the term of the warrants, (3) expected volatility of 82.92% based on the historical volatility of comparable companies' stock, (4) no expected dividends, and (5) fair value of the Company's stock at $12.88 per share.

The fair value amount of the warrants from the two PIPE transactions were included in additional paid-in capital as deal costs.

The following table summarizes warrant activities for the years ended December 31, 2020 and 2019:
Number of
Shares
Weighted
Average
Exercise Price
Weighted
Average
Remaining Contractual
Term (in Years)
Aggregate
Intrinsic Value
Outstanding, December 31, 2018
776,350  $ 1.75  4.80 $ — 
Granted 1,458,356  10.88  —  — 
Exercised (685,900) 2.12  —  6,073,855 
Forfeited (cashless exercise) (174,198) 3.99  —  — 
Outstanding, December 31, 2019 1,374,608  $ 10.97  4.43 $ 13,591 
Exercised (40,891) 1.75  —  247,799 
Forfeited (cashless exercise) (9,109) 1.75  —  — 
Outstanding December 31, 2020 1,324,608  $ 11.32  3.44 $  
Exercisable, December 31, 2020 1,324,608  $ 11.32  3.44 $