Note 6 - Stockholders’ Equity

Common Stock

On November 3, 2022, the holders of a majority of the voting power of the common stock of the Company executed a written consent approving a change in the number of the Company’s authorized shares from 13,500,000 to 50,000,000, with a par value of $0.0001 per share, by filing a Certificate Amendment to the Company’s Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware. 700,000 shares were designated as “Class A common stock.” The amendment was filed with the Secretary of State of the State of Delaware on December 5, 2022 with an effective date of December 6, 2022 (See Note 1).

As of December 31, 2022 and 2021, there were 700,000 shares of Class A common stock issued and outstanding to Fortress. Dividends are to be distributed pro-rata to the Class A and common stockholders. The holders of common stock are entitled to one vote per share of common stock held. The Class A common stockholders are entitled to a number of votes per share equal to 1.1 times a fraction, the numerator of which is the sum of the shares of outstanding common stock and the denominator of which is the number of shares of Class A common stock. Accordingly, the holder of shares of Class A common stock will be able to control or significantly influence all matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other business combination transactions. Each share of Class A common stock is convertible, at the option of the holder thereof, into one (1) fully paid and non-assessable share of common stock subject to adjustment for stock splits and combinations.

In November 2020, the Company filed a shelf registration statement on Form S-3 (the “S-3”), which was declared effective in December 2020. Under the S-3, the Company may sell up to a total of $100 million of its securities. In connection with the S-3, the Company entered into an ATM with Cantor Fitzgerald & Co., Ladenburg Thalmann & Co. Inc. and H.C. Wainwright & Co., LLC (each an “Agent” and collectively, the “Agents”) relating to the sale of shares of common stock. Under the ATM, the Company pays the Agents a commission rate of up to 3.0% of the gross proceeds from the sale of any shares of common stock.

During the year ended December 31, 2021, the Company sold a total of 1,189,999 shares of common stock under the ATM for aggregate total gross proceeds of approximately $41.3 million at an average selling price of $34.69 per share, resulting in net proceeds of approximately $40.3 million after deducting commissions and other transaction costs.

During the year ended December 31, 2022, the Company sold a total of 532,816 shares of common stock under the ATM for aggregate total gross proceeds of approximately $10.1 million at an average selling price of $18.99 per share, resulting in net proceeds of approximately $9.9 million after deducting commissions and other transaction costs.

In December 2022, the Company closed on the December 2022 Registered Direct Offering with a single institutional investor for the issuance and sale of 950,000 shares of its common stock and 784,105 Pre-Funded Warrants. Each Pre-Funded Warrant was exercisable for one share of our common stock. The common stock and the Pre-Funded Warrants were sold together with Series A warrants to purchase up to 1,734,105 shares of common stock and Series B warrants to purchase up to 1,734,105 shares of common stock, at a purchase price of $4.325 per share of common stock and associated December 2022 Common Stock Warrants, and $4.33249 per Pre-Funded Warrant and associated December 2022 Common Stock Warrants. The Pre-Funded Warrants were funded in full at closing except for a nominal exercise price of $0.0001 and are exercisable commencing on the closing date and will terminate when such Pre-Funded Warrants are exercised in full. The Series A warrants are exercisable immediately upon issuance and will expire five years following the issuance date and have an exercise price of $4.075 per share and the Series B warrants are exercisable immediately upon issuance and will expire eighteen months following the issuance date and have an exercise price of $4.075 per share. The Company also issued the placement agent warrants to purchase up to 104,046 shares of common stock with an exercise price of $5.406 per share (the “Placement Agent Warrants”). Net proceeds from the December 2022 Registered Direct Offering were $6.7 million after deducting commissions and other transaction costs (See Note 7).

Pursuant to the Founders Agreement, the Company issued to Fortress 2.5% of the aggregate number of shares of common stock issued in the offerings noted above. Accordingly, the Company issued 56,671 shares and 29,749 shares to Fortress for the years ended December 31, 2022 and 2021, respectively, and recorded expenses of approximately $0.4 million and $1.0 million related to these stock grants, which is included in general and administrative expenses in the Company’s Statements of Operations for the years ended December 31, 2022 and 2021, respectively.

Pursuant to the Founders Agreement, the Company issued 368,907 and 212,142 shares of common stock to Fortress for the Annual Equity Fee, representing 2.5% of the fully-diluted outstanding equity of the Company on January 1, 2023 and January 1, 2022, respectively (see Notes 2 and 4).

Subsequent to the offerings noted above, approximately $22.3 million of securities remain available for sale under the S-3. The Company may offer the securities under the S-3 from time to time in response to market conditions or other circumstances if it believes such a plan of financing is in the best interests of its stockholders.

Equity Incentive Plan

The Company has in effect the Amended and Restated 2015 Incentive Plan (“2015 Incentive Plan”). The 2015 Incentive Plan was adopted in March 2015 by our stockholders. Under the 2015 Incentive Plan, the compensation committee of the Company’s board of directors is authorized to grant stock-based awards to directors, officers, employees and consultants. An amendment to the 2015 Incentive Plan was approved by holders of a majority of the voting power of the common stock of the Company in December 2022 to increase the shares available for issuance to 3,000,000 shares. The plan expires 10 years from the effective date of the amendment and limits the term of each option to no more than 10 years from the date of grant.

As of December 31, 2022, 2,238,798 shares are available for issuance under the 2015 Incentive Plan.

Restricted Stock Awards

Certain employees, directors and consultants have been awarded restricted stock. The restricted stock vesting consists of milestone and time-based vesting. The following table summarizes restricted stock award activity for the year ended December 31, 2022 and 2021:

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As of December 31, 2022, there was $2.7 million of total unrecognized compensation cost related to non-vested restricted stock, which is expected to be recognized over a weighted-average period of 1.9 years. This amount does not include, as of December 31, 2022, 51,333 shares of restricted stock outstanding which are performance-based and vest upon achievement of certain corporate milestones. The expense is recognized over the vesting period of the award. Stock-based compensation for milestone awards will be measured and recorded if and when it is probable that the milestone will be achieved.

Restricted Stock Units

Certain employees have been awarded restricted stock units. The following table summarizes restricted stock units activity for the year ended December 31, 2022:

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As of December 31, 2022, all restricted stock units outstanding are performance-based and vest upon achievement of certain corporate milestones. The expense for milestone awards will be measured and recorded if and when it is probable that the milestone will be achieved. Because the achievement of these corporate milestones was not probable as of December 31, 2022, no expense related to the restricted stock units has been recognized for the year ended December 31, 2022.

Stock Options

The following table summarizes stock option award activity for the year ended December 31, 2022 and 2021:

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Upon the exercise of stock options, the Company will issue new shares of its common stock.

The Company used the Black-Scholes Model for determining the estimated fair value of stock-based compensation related to stock options. The table below summarizes the assumptions used:

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Warrants

A summary of warrant activities for year ended December 31, 2022 and 2021 is presented below:

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Upon the exercise of warrants, the Company will issue new shares of its common stock.

Stock-Based Compensation

The following table summarizes stock-based compensation expense for the years ended December 31, 2022 and 2021 (in thousands).

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