10. COMMON STOCK

[a] Authorized

150,000,000 authorized common voting shares, par value of $0.001, and 5,000,000 preferred shares, par value of $0.001.

[b] Issued and outstanding shares

Purchase Agreement and Financing with Lincoln Park Capital

On September 14, 2017 we and Lincoln Park Capital Fund, LLC, or LPC, entered into a share and unit purchase agreement, which was amended on March 12, 2020, or the Purchase Agreement, pursuant to which we have the right to sell to LPC up to $11.0 million in shares of our common stock, par value $0.001 per share, subject to certain limitations and conditions set forth in the Purchase Agreement. On May 22, 2018 we obtained the requisite stockholder authorization to sell shares of our common stock to LPC in excess of 20% of our outstanding shares of common stock (as of the date we entered into the Purchase Agreement) in order to be able to sell to LPC the full amount remaining under the Purchase Agreement. 

Pursuant to the Purchase Agreement, LPC initially purchased 1,644 of our units, or the Units, at a purchase price of $608 per unit, with each Unit consisting of (a) one share of our common stock and (b) one warrant to purchase one-quarter of a share of common stock at an exercise price of $699.20 per share, or Warrant.  Each Warrant became exercisable six months following the issuance date until the date that is five years and six months after the issuance date and is subject to customary adjustments.  The Warrants were issued only as part of the Units in the initial purchase of $1.0 million and no warrants shall be issued in connection with any other purchases of common stock under the Purchase Agreement.

After the initial purchase, if our stock price is above $1.00, as often as every other business day over the 54-month term of the Purchase Agreement, and up to an aggregate amount of an additional $10.0 million (subject to certain limitations) of shares of common stock, we have the right, from time to time, in our sole discretion and subject to certain conditions to direct LPC to purchase up to 7,500 shares of common stock. The purchase price of shares of common stock pursuant to the Purchase Agreement will be based on prevailing market prices of common stock at the time of sales without any fixed discount, and we will control the timing and amount of any sales of common stock to LPC. As consideration for entering into the Purchase Agreement, we issued to LPC 617 shares of common stock in September 2017 and, in connection with the amendment of the Purchase Agreement in March 2020, we agreed to pay to LPC $0.1 million as an expense reimbursement. The consideration of 617 shares of our common stock were fair valued based on the closing price of our common stock as at the transaction date and recognized as part of offering expenses.

During year ended December 31, 2020, we offered and sold zero shares of our common stock pursuant to the Purchase Agreement with LPC. Since entering into the Purchase Agreement, from September 14, 2017 through December 31, 2020, we offered and sold an aggregate of 27,868 shares of our common stock, including the 1,644 shares that were part of the initial purchase of Units. These aggregate sales resulted in gross proceeds to us of approximately $4.4 million and offering expenses of $0.5 million.

June 2018 Public Offering

On June 19, 2018, we completed an underwritten registered public offering, pursuant to which we sold 35,525 Class A Units at a price per unit of $80.00 and 9,158 Class B Units at a price per unit of $1,000.

Each Class A Unit consisted of one share of our common stock and a warrant to purchase one share of common stock.

Each Class B Unit consisted of one share of Series A Convertible Preferred Stock, par value $0.001 per share, convertible at any time at the holder’s option into approximately 12 shares of common stock and warrants to purchase approximately 12 shares of common stock.

Each warrant was immediately exercisable, expires on the five-year anniversary of the date of issuance and is exercisable at a price per share of common stock of $80.00. Additionally, subject to certain exceptions, if, after the June 19, 2018, (i) the volume weighted average price of our common stock for each of 30 consecutive trading days, or the 2018 Measurement Period, which 2018 Measurement Period commences on June 19, 2018, exceeds 300% of the exercise price (subject to adjustments for stock splits, recapitalizations, stock dividends and similar transactions), (ii) the average daily trading volume for such 2018 Measurement Period exceeds $500,000 per trading day and (iii) certain other equity conditions are met, and subject to a beneficial ownership limitation, then we may call for cancellation of all or any portion of the warrants then outstanding.

The Class A Units and Class B Units were not certificated and the shares of common stock, Series A Convertible Preferred Stock and warrants comprising such Units were immediately separable and were issued separately in the public offering. The Class A and B Units were offered by us pursuant to the registration statement on Form S-1 (File No. 333-224840), and each amendment thereto, which was initially filed with the SEC, on May 10, 2018 and declared effective by the SEC on June 14, 2018 and the registration statement on Form S-1 (File No. 333- 225649) filed by the us with the SEC pursuant to Rule 462(b) of the Securities Act of 1933 on June 14, 2018.

In addition, pursuant to the Underwriting Agreement we entered into with Ladenburg Thalmann & Co. Inc., or the Underwriter, on June 15, 2018, we granted the Underwriter a 45 day option, or the 2018 Overallotment Option, to purchase up to 22,500 additional shares of common stock and/or warrants to purchase up to 22,500 shares of Common Stock solely to cover over-allotments. The 2018 Overallotment Option was exercised in full on June 18, 2018.

The public offering raised total gross proceeds of $13.8 million and after deducting $1.6 million in underwriting discounts and commissions and offering expenses, we received net proceeds of $12.2 million

The underwriting discounts and commissions and offering expenses have been charged against the gross proceeds.

As of December 31, 2019, all 9,158 shares of the Series A Convertible Preferred Stock had been converted into 114,475 shares of common stock, and no shares of the Series A Convertible Preferred Stock remained outstanding.

October 2018 Registered Direct Offering

On October 3, 2018 we completed a registered direct offering, pursuant to which we sold approximately 89,462 shares of common stock at a price per share of $62.89. We also issued to the investors in a concurrent private placement unregistered warrants to purchase up to 0.5 shares of common stock for each share purchased in the registered direct offering with an exercise price of $62.89 per share. The warrants were exercisable immediately upon issuance and will expire five years following the date of issuance.

The registered direct offering raised total gross proceeds of $5.6 million, and after deducting approximately $0.6 million in placement agent fees and offering expenses, we received net proceeds of $5.0 million.

The placement agent fees and offering expenses have been charged against the gross proceeds. 

December 2019 Public Offering

On December 17, 2019, we completed an underwritten registered public offering, pursuant to which we sold, 478,875 Class A Units at a price per unit of $12.00 and 6,256 Class B Units at a price per unit of $999.60.

Each Class A Unit consisted of one share of our common stock and a warrant to purchase one share of common stock.

Each Class B Unit consisted of one share of Series B Convertible Preferred Stock, par value $0.001 per share, convertible at any time at the holder’s option into 83 shares of common stock, and warrants to purchase 83 shares of common stock.

Each warrant was immediately exercisable, expires on the five year anniversary of the date of issuance and is exercisable at a price per share of common stock of $6.60, subject to adjustment in the event of subsequent equity sales of common stock or securities convertible into common stock for an exercise price per share less than the exercise price per share of the warrants then in effect, provided, however, that the exercise price of the warrants cannot be reduced to an amount less than $1.2 per share of common stock. Additionally, subject to certain exceptions, if, after December 17, 2019, (i) the volume weighted average price of the common stock for each of 30 consecutive trading days, or the 2019 Measurement Period, which 2019 Measurement Period commences on the closing date, exceeds 300% of the exercise price (subject to adjustments for stock splits, recapitalizations, stock dividends and similar transactions), (ii) the average daily trading volume for such 2019 Measurement Period exceeds $500,000 per trading day and (iii) certain other equity conditions are met, and subject to a beneficial ownership limitation, then we may call for cancellation of all or any portion of the warrants then outstanding.

The Class A Units and Class B Units were not certificated and the shares of common stock, Series B Convertible Preferred Stock and warrants comprising such units were immediately separable and were issued separately in the public offering. The Class A Units and B Units were offered by us pursuant to the registration statement on Form S-1 (File No. 333-234530), and each amendment thereto, which was initially filed with the SEC on November 6, 2019 and declared effective by the SEC on December 17, 2019.

In addition, pursuant to the Underwriting Agreement we entered into with Ladenburg Thalmann & Co. Inc., or Ladenburg, on December 17, 2019, we granted Ladenburg a 45 day option, or the 2019 Overallotment Option, to purchase up to 150,000 additional shares of common stock and/or warrants to purchase up to 150,000 shares of common stock solely to cover over-allotments. The 2019 Overallotment Option was exercised in full on December 17, 2019.

The public offering raised total gross proceeds of $13.8 million and after deducting $1.5 million in underwriting discounts and commissions and offering expenses, we received net proceeds of $12.3 million.

The underwriting discounts and commissions and offering expenses have been charged against the gross proceeds.

As of December 31, 2020, all 6,256 shares of the Series B Convertible Preferred Stock had been converted into 521,124 shares of common stock, and no shares of the Series B Convertible Preferred Stock remained outstanding.

April 2020 Private Placement

On April 27, 2020 and April 28, 2020, we entered into subscription agreements with certain accredited investors pursuant to which we sold to the purchasers in a private placement approximately 280,782 units, or Units, each consisting of (i) one share of common stock, and (ii) a warrant to purchase 0.75 shares of common stock at an offering price of $6.60 per Unit, for aggregate gross proceeds of approximately $1.9 million. The placement agent received a cash commission on the gross proceeds from the sale of the Units and was issued a five (5) year warrant upon substantially similar terms as the investor warrants to purchase 25,270 shares of common stock at an initial exercise price of $7.59 per share. The net proceeds to us, after deducting placement agent expenses and commissions and offering expenses was approximately $1.6 million.

Each warrant is exercisable beginning on October 27, 2020, the six-month anniversary of the initial closing date of the offering, through April 27, 2025, which is the five-year anniversary of the initial closing date of the offering. The warrants issued pursuant to subscription agreements executed on April 27, 2020 are exercisable at a price per share of common stock of $7.24, subject to adjustment, and the warrants issued pursuant to subscription agreements executed on April 28, 2020 are exercisable at a price per share of common stock of $7.32, subject to adjustment. Additionally, subject to certain exceptions, if, after the initial exercise date, (i) the volume weighted average price of the common stock for each of 30 consecutive trading days, or the Measurement Period, which, Measurement Period commences on the closing date, exceeds 300% of the exercise price (subject to adjustments for stock splits, recapitalizations, stock dividends and similar transactions), (ii) the average daily trading volume for such Measurement Period exceeds $500,000 per trading day and (iii) certain other equity conditions are met, and subject to a beneficial ownership limitation, then we may call for cancellation of all or any portion of the warrants then outstanding.

The broker expenses and commissions and offering expenses have been charged against the gross proceeds.

July 2020 Registered Direct Offering

On July 1, 2020, we completed a registered direct offering, pursuant to which we sold 731,707 shares of our common stock at a price of $8.20 per share.

The registered direct offering raised total gross proceeds of approximately $6.0 million, and after deducting approximately $0.7 million in placement agent fees and offering expenses, we received net proceeds of approximately $5.3 million.

The placement agent fees and offering expenses have been charged against the gross proceeds.

August 2020 Public Offering

On August 6, 2020, we completed an underwritten public offering of our securities, or the Public Offering, pursuant to which we sold an aggregate of (a) 569,043 shares of our common stock, including 92,856 shares subject to the underwriter’s option to purchase additional shares, or the Shares, and (b) prefunded warrants to purchase 142,857 shares of our common stock, or the Pre-Funded Warrants, to the underwriter. The Shares were sold at the public offering price of $10.50 per share. The Pre-Funded Warrants were sold at a public offering price of $10.499, which represents the per share public offering price for the Shares less a $0.001 per share exercise price for each such Pre-Funded Warrant.

The Pre-Funded Warrants are exercisable at any time after the date of issuance. A holder of Pre-Funded Warrants may not exercise the warrant if the holder, together with its affiliates, would beneficially own more than 9.99% of the number of shares of common stock outstanding immediately after giving effect to such exercise. A holder of Pre-Funded Warrants may increase or decrease this percentage, but not in excess of 19.99%, by providing at least 61 days’ prior notice to us.

The Public Offering raised total gross proceeds of approximately $7.5 million and after deducting approximately $0.7 million in underwriting discounts and commissions and offering expenses, we received net proceeds of approximately $6.8 million. The underwriting discounts and commissions and offering expenses have been charged against the gross proceeds.

December 2020 Public Offering

On December 7, 2020, we completed an underwritten public offering of our securities, pursuant to which we sold an aggregate of 2,472,500 shares of our common stock, including 322,500 shares subject to the underwriter’s option to purchase additional shares, or the Shares. The Shares were sold at the public offering price of $7.00 per share.

We also issued a warrant to purchase 50,000 shares of common stock to the representative of the underwriters, the Representative’s Warrant, as a portion of the underwriting compensation payable in connection with this offering. The Representative’s Warrant will be exercisable beginning on May 31, 2021, with an exercise price of $8.75 per share and a term of five years. Under ASC 260, the fair value of the Representative’s Warrant of $0.3 million was charged against Additional Paid-In Capital.

The Public Offering raised total gross proceeds of approximately $17.3 million and after deducting approximately $1.5 million in underwriting discounts and commissions and offering expenses, we received net proceeds of approximately $15.8 million. The underwriting discounts and commissions and offering expenses have been charged against the gross proceeds.

Equity Award Issuances and Settlements

During the year ended December 31, 2020, we did not issue any shares of common stock to satisfy stock option exercises and issued 236 shares of common stock to satisfy restricted stock unit settlements, compared with the issuance of no shares of common to satisfy stock option exercises and 256 shares of common stock to satisfy restricted stock unit settlements for the year ended December 31, 2019.  

[c] Stock options

2018 Equity Incentive Plan

As of December 31, 2020, we had reserved, pursuant to the 2018 Equity Incentive Plan, or the 2018 Plan, 215,514 common shares for issuance upon exercise of stock options and settlement of restricted stock units by employees, directors, officers and consultants of ours, of which 214,055 were reserved for options currently outstanding and 1,459 were available for future equity grants.

Under the 2018 Plan, we may grant options to purchase common shares or restricted stock units to our employees, directors, officers and consultants. The exercise price of the options is determined by our board of directors but will be at least equal to the fair value of the common shares at the grant date. The options vest in accordance with terms as determined by our board of directors, typically over three to four years for options issued to employees and consultants, and over one to three years for members of our board of directors. The expiry date for each option is set by our board of directors with a maximum expiry date of ten years from the date of grant. In addition, the 2018 Plan allows for accelerated vesting of outstanding equity awards in the event of a change in control. The terms for accelerated vesting, in the event of a change in control, is determined at our discretion and defined under the employment agreements for our officers and certain of our employees.

2017 Equity Incentive Plan

As of December 31, 2020, we had reserved, pursuant to the 2017 Equity Incentive Plan, or the 2017 Plan, 13,156 common shares for issuance upon exercise of stock options, currently outstanding, by employees, directors and officers of ours. Upon the effectiveness of our 2018 Plan, we ceased granting equity awards under our 2017 Plan.

Under the 2017 Plan, we granted options to purchase common shares or restricted stock units to our employees, directors, officers and consultants. The exercise price of the options was determined by our board of directors but was at least equal to the fair value of the common shares at the grant date. The options vest in accordance with terms as determined by our board of directors, typically over three to four years for options issued to employees and consultants, and over one to three years for members of our board of directors. The expiry date for each option was set by our board of directors with a maximum expiry date of ten years from the date of grant. In addition, the 2017 Plan allows for accelerated vesting of outstanding equity awards in the event of a change in control. The terms for accelerated vesting, in the event of a change in control, is determined at our discretion and defined under the employment agreements for our officers and certain of our employees.

2010 Performance Incentive Plan

As of December 31, 2020, we had reserved, pursuant to the 2010 Performance Incentive Plan, or the 2010 Plan, 462 common shares for issuance upon exercise of stock options and settlement of restricted stock units by employees, directors, officers and consultants of ours, of which 231 were reserved for options currently outstanding and 231 were reserved for restricted stock units currently outstanding.

Under the 2010 Plan we granted options to purchase common shares and restricted stock units to our employees, directors, officers and consultants. The exercise price of the options was determined by our board of directors and was at least equal to the fair value of the common shares at the grant date. The options vest in accordance with terms as determined by our board of directors, typically over three to four years for options issued to employees and consultants, and over one to three years for members of our board of directors. The expiry date for each option is set by our board of directors with a maximum expiry date of ten years from the date of grant. In addition, the 2010 Plan allows for accelerated vesting of outstanding equity awards in the event of a change in control. The terms for accelerated vesting, in the event of a change in control, is determined at our discretion and defined under the employment agreements for our officers and certain of our employees.

ASC 718 Compensation – Stock Compensation

We recognize expense related to the fair value of our stock-based compensation awards using the provisions of ASC 718. We use the Black-Scholes option pricing model as the most appropriate fair value method for our stock options and recognize compensation expense for stock options on a straight-line basis over the requisite service period. In valuing our stock options using the Black-Scholes option pricing model, we make assumptions about risk-free interest rates, dividend yields, volatility and weighted average expected lives, including estimated forfeiture rates of the options.

The expected life was calculated based on the simplified method as permitted by the SEC’s Staff Accounting Bulletin 110, Share-Based Payment. We consider the use of the simplified method appropriate because of the lack of sufficient historical exercise data. The computation of expected volatility was based on the historical volatility of comparable companies from a representative peer group selected based on industry and market capitalization. The risk-free interest rate is based on a U.S. Treasury instrument whose term is consistent with the expected life of the stock options. In addition to the assumptions above, as required under ASC 718, management made an estimate of expected forfeitures and is recognizing compensation costs only for those equity awards expected to vest. Forfeiture rates are estimated using historical actual forfeiture rates. These rates are adjusted on a quarterly basis and any change in compensation expense is recognized in the period of the change. We have never paid or declared cash dividends on our common stock and do not expect to pay cash dividends in the foreseeable future.

The estimated fair value of stock options granted in the respective periods was determined using the Black-Scholes option pricing model using the following weighted average assumptions:

The weighted average fair value of stock options granted during the year ended December 31, 2020 was $8.76.  

The results for the periods set forth below included stock-based compensation expense in the following expense categories of the consolidated statements of loss (in thousands):

Stock option transactions and the number of stock options outstanding are summarized below:

The following table summarizes information about stock options outstanding at December 31, 2020 regarding the number of ordinary shares issuable upon: (1) outstanding options and (2) vested options.

(1) Number of common shares issuable upon exercise of outstanding options:

(2) Number common shares issuable upon exercise of vested options:

As at December 31, 2020, and December 31, 2019, the total unrecognized compensation expense related to stock options granted was $2.2 million and $1.8 million, respectively, each of which is expected to be recognized into expense over a period of approximately 2.18 years.

The estimated grant date fair value of stock options vested during the years ended December 31, 2020, 2019 and 2018 was $1.0 million, $0.9 million and $1.0 million, respectively.

The aggregate intrinsic value of options exercised was calculated as the difference between the exercise price of the stock options and the fair value of the underlying common stock as of the date of exercise. The aggregate intrinsic value of options exercised for the years ended December 31, 2020, 2019 and 2018 was zero, zero and zero, respectively. At December 31, 2020, the aggregate intrinsic value of the outstanding options was zero and the aggregate intrinsic value of the exercisable options was zero.

[d] Restricted Stock Unit Awards

We grant restricted stock unit awards that generally vest and are expensed over a four-year period. We also grant restricted stock unit awards that vest in conjunction with certain performance conditions to certain executive officers and key employees. At each reporting date, we are required to evaluate whether achievement of the performance conditions is probable. Compensation expense is recorded over the appropriate service period based upon our assessment of accomplishing each performance provision. For the years ended December 31, 2020, 2019 and 2018, $0.1 million, $0.4 million and $0.2 million, respectively, of stock based compensation expense was recognized related to these awards.

The following table summarizes our restricted stock unit award activity during the year ended December 31, 2020:

As of December 31, 2020, we had approximately $0.1 million in total unrecognized compensation expense related to our restricted stock unit awards which is to be recognized over a weighted-average period of approximately 0.58 years.

[e] Stock Warrants

On May 30, 2019, we entered into a Warrant Exercise Agreement, or the Exercise Agreement, with an institutional investor. Pursuant to the Exercise Agreement, the investor exercised (i) outstanding warrants to purchase 13,515 shares of our common stock with an exercise price of $62.89 per share issued as part of the October 2018 financing and (ii) outstanding warrants to purchase 41,875 shares of our common stock with an exercise price of $80.00 per share issued as part of the June 2018 financing, for aggregate exercise proceeds to us of approximately $4.2 million, or, collectively, the Warrant Exercise.

As an inducement for the Warrant Exercise, we agreed to issue to the investor a new warrant, exercisable for six years, to purchase up to 60,000 shares of our common stock at an exercise price of $90 per share, or the New Warrant. We also agreed to file a registration statement covering the resale of the shares underlying the New Warrant Shares. The New Warrant and the shares underlying the New Warrant were offered to the investor in reliance upon the exemption provided by Rule 506 of Regulation D and Section 4(a)(2) of the Securities Act of 1933.

Under ASC 260, the fair value of the New Warrant of $3.9 million was recognized into accumulated deficit on our consolidated balance sheet as at June 30, 2019. We determined the fair value of the New Warrant using the Black-Scholes pricing model with the following assumptions: stock price of $84.6, volatility of 97.16%, risk-free interest rate of 2.06% and expected term of six years.

The following is a summary of outstanding warrants to purchase common stock at December 31, 2020:

*The pre-funded warrants do not have an expiration date. 

For the year ended December 31, 2020, 489,952 of the warrants issued in the December 2019 financing were exercised at a per unit price of $6.60, for proceeds of $3.2 million. For the year ended December 31, 2019, 41,875 of the warrants issued in the June 2018 financing were exercised at a per unit price of $80.00, for proceeds of $3.4 million and 13,515 of the warrants issued in the October 2018 financing were exercised at a per unit price of $62.89, for proceeds of $0.8 million. As at December 31, 2020, all of our outstanding warrants are classified as equity.     

[f] 401(k) Plan

We maintain a 401(k) plan. Our securities are not offered as an investment option. Our shares are prohibited for inclusion our 401(k) plan, as well as any match of our shares to employee contributions.

[g] Loss per common share

The following table presents the computation of basic and diluted net loss attributable to common stockholders per share (in thousands, except per share and share amounts):

As of December 31, 2020, a total of 1.5 million options, restricted stock units and warrants, respectively, have not been included in the calculation of potential common shares as their effect on diluted per share amounts would have been anti-dilutive.