Stockholders' Equity

12 Months Ended

Dec. 31, 2021

Stockholders' Equity

Stockholders' Equity

15. Stockholders’ Equity

Preferred Stock

The Company’s Certificate of Incorporation authorizes the Company to issue up to 10,000,000 shares of preferred stock, $0.001 par value per share.  Under the terms of the Company’s Certificate of Incorporation, the board of directors is authorized, subject to any limitations prescribed by law, without stockholder approval, to issue such shares of preferred stock in one or more series. Each such series of preferred stock shall have such rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be determined by the board of directors.  In November 2004, the Company filed a certificate of designation designating 2,045,714 shares of the Company’s preferred stock as shares of Series A Convertible Preferred Stock, which shares were later issued.  All of the shares of Series A Convertible Preferred Stock that were issued was converted into common stock and may not be reissued.  Accordingly, as of December 31, 2021, there were 7,954,286 undesignated shares of preferred stock remaining available for issuance.  There were no issuances of preferred stock during the years ended December 31, 2021 and 2020. 

Common Stock

The Company is authorized to issue 30,000,000 shares of common stock, $0.001 par value per share.  As of December 31, 2021, there were 8,842,026 shares issued and outstanding.

Common Stock Issuances - Employee Stock Option Exercises

Shares of common stock issued as a result of stock option exercises and realized gross proceeds for the year ended December 31, 2021 were 41,086 and $179,273, respectively.

Shares of common stock issued as a result of stock option exercises and realized gross proceeds for the year ended December 31, 2020 were 32,803 and $4,999, respectively.

Common Stock Issuances – Restricted Stock Awards

 During the year ended December 31, 2021, there were 123,356 shares of common stock were issued in accordance with the vesting terms of the RSAs. Two employees received less than the shares vested because they elected to have a total of 12,526 shares withheld in satisfaction of each of the employees corresponding tax liability of approximately $140,900. The Company’s payment of this tax liability was recorded as a cash flow from financing activity on the consolidated statement of cash flows.

During the year ended December 31, 2020, there were 58,123 shares of common stock vested in accordance with the vesting terms of RSAs.

See Note 16 for additional information regarding stock option plans.

Warrants

As part of the consideration for the acquisition of ITA, the Company issued warrants to purchase 75,000 shares of common stock based on a strike price of $5.33. The Company valued the warrants using the Black Scholes Model using the following assumptions for October 1, 2021 as set forth below:

Warrants issued	75,000
Expected dividend yield	-
Expected volatility	66.0%
Risk-free interest rate	0.71%
Term	4 years

The warrants to acquire shares of common stock issued on October 1, 2021 were recorded in equity upon issuance. During its evaluation of equity classification for the warrants issued at closing to acquire shares of common stock issued in 2021, the Company considered the conditions as prescribed within ASC 815-40, Derivatives and Hedging, Contracts in an Entity’s own Equity (“ASC 815-40”). The conditions within ASC 815-40 are not subject to a probability assessment. The warrants to acquire shares of common stock do not fall under the liability criteria within ASC 480, Distinguishing Liabilities from Equity, as they are not puttable and do not represent an instrument that has a redeemable underlying security. The Company determined that the warrants meet the criteria for being indexed to its own stock and would be classified in shareholders’ equity.  Accordingly, the warrants meet the scope exception for being treated as derivatives and classified in shareholders’ equity.

Contingent Warrants

Liability-classified warrants consist of warrants to acquire common stock at an exercise price of $5.33 per share as part of the consideration for the acquisition of ITA, during the earn-out period from 2021 to 2024. Refer to Note 3 for more information about the terms of the contingent warrants. Based on our consideration of the ASC 815-40 guidance, we account for these contingent warrants as a liability. The estimated fair value of outstanding contingent warrants accounted for as liabilities is determined at each balance sheet date. Any decrease or increase in the estimated fair value of the warrant liability since the most recent balance sheet date is recorded in the consolidated statement of operations as a non-operating income (expense). Refer to Note 4 for more information about the fair value measurements. 

Stock Repurchase Program

On October 7, 2019, the Company announced that its Board of Directors approved a stock repurchase plan (the “Repurchase Plan”) to purchase up to $2.5 million of the Company’s common stock. Any repurchases will be made in compliance with the SEC’s Rule 10b-18 if applicable, and may be made in the open market or in privately negotiated transactions, including the entry into derivatives transactions. During the three months ended March 31, 2020, we repurchased 2,416 shares for a total of $10,100 under the Repurchase Plan. This plan was suspended on March 9, 2020, as a precaution due to the COVID-19 pandemic, which suspension was removed on September 27, 2021. During November 2021, the Board increased the size of the Repurchase Plan to up to $5.0 million of the Company common stock, increase the amount available for future purchases under the Repurchase Plan to $4.6 million. During the year ended December 31, 2021, we repurchased 299,494 of our common stock for a total of approximately $1.2 million.

At The Market Offering Agreement

On August 18, 2020, the Company entered into an At-The-Market Issuance Sales Agreement (the “Sales Agreement”) with B. Riley Securities, Inc. (“B. Riley FBR”), The Benchmark Company, LLC (“Benchmark”) and Spartan Capital Securities, LLC (“Spartan”, and together with B. Riley FBR and Benchmark, the “Sales Agents”) which establishes an at-the-market equity program pursuant to which we may offer and sell shares of our common stock, par value $0.001 per share, from time to time as set forth in the Sales Agreement. The Sales Agreement provides for the sale of shares of the Company’s common stock having an aggregate offering price of up to $24,000,000.

The Sales Agreement will terminate upon the earlier of sale of all of the shares under the Sales Agreement or termination of the Sales Agreement as permitted.

During the first quarter ended March 31, 2021, the Company sold 100,687 shares for gross proceeds of $1.1 million and has incurred $62,700 of offering costs. During the year ended December 31, 2020, we sold 399,313 shares of our common stock through the Sales Agents for a total of approximately $4,678,381, resulting in net proceeds to us of approximately $4,345,475.