Note 10 - Equity, Share-based Compensation, Warrants and Securities Offerings

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Shareholders' Equity and Share-Based Payments [Text Block]

NOTE 10. EQUITY, SHARE-BASED COMPENSATION, WARRANTS AND SECURITIES OFFERINGS

In August 2022, our board of directors approved a 1 for 10 reverse split of our common stock. Our common stock began trading on a post-split basis on August 26, 2022. All share and per share information has been retrospectively adjusted for all prior periods presented giving retroactive effect to the reverse stock split. Such adjustments include calculations of our weighted average number of shares outstanding and loss per share, as well as disclosures regarding our share-based compensation and warrants.

Preferred Stock

Our board of directors, without further action or vote by holders of our common stock, has the right to establish the terms, preference, rights and restrictions and issue shares of preferred stock. We previously designated and issued six series of preferred stock of which no shares remain outstanding. In addition, we designated and issued a seventh series of preferred stock, Series G, of which 150 shares remain outstanding as of December 31, 2022.

The Series G preferred stock is non-voting and may be converted into shares of our common stock at the holders’ election at any time, subject to certain beneficial ownership limitations, at a ratio of 1 preferred share for 94.89915 shares of common stock. The Series G preferred stock is entitled to receive dividends if we pay dividends on our common stock, in which case the holders of the preferred stock are entitled to receive the amount and form of dividends that they would have received if they held the common stock that is issuable upon conversion of the Series G preferred stock. If we are liquidated or dissolved, the holders of Series G preferred stock are entitled to receive, before any amounts are paid in respect of our common stock, an amount per share of preferred stock equal to $1,000, plus any accrued but unpaid dividends thereon.

Securities Offerings

In October 2022, we issued and sold 675,000 shares of our common stock and a prefunded warrant (the 2022 Prefunded Warrant) exercisable into 325,000 shares of our common stock pursuant to our effective “shelf” registration statement on Form S-3. The holder exercised the 2022 Prefunded Warrant with an exercise price of $0.0001 per share (net of the $1.4999 per share prefunded) in full in 2022. In a concurrent private placement, we issued and sold warrants for the purchase up to 2,000,000 shares of our common stock at an exercise price of $1.60 per share, which are exercisable in April 2023, and expire in October 2025. The net proceeds from the concurrent offerings of $1.0 million, after deducting placement agent fees and other offering expenses of $0.5 million, were allocated to equity. As of December 31, 2022, $0.3 million of these offering costs were unpaid. We determined the exercise price of the 2022 Prefunded Warrant was nominal and, as such, we will consider the shares underlying that warrant to be outstanding effective October 20, 2022, for the purposes of calculating basic earnings (loss) per share (EPS). We intend to use the net proceeds from the October 2022 offerings for general corporate purposes, which may include funding capital expenditures, working capital and repaying indebtedness. In addition, we issued warrants for the purchase of up to 63,000 shares of our common stock to the placement agent at an exercise price of $1.875 per share which expire in October 2027.

In September 2021, we issued and sold 230,750 shares of common stock, a warrant for the purchase of up to 230,769 shares of common stock (Warrant A), and a prefunded warrant (the 2021 Prefunded Warrant) for the purchase of up to 230,786 shares of common stock pursuant to our effective “shelf” registration statement on Form S-3. The initial $10.00 per share exercise price of Warrant A was subject to adjustment in September 2022, and will be subject to adjustment again in September 2023, if 110% of the 5-day volume weighted average price of our common stock is less than the then-current exercise price. The 2021 Prefunded Warrant, which the holder exercised in full in 2021, had an exercise price of $0.001 (net of the $6.499 per share prefunded). We determined that the 2021 Prefunded Warrant qualified for equity accounting, however, Warrant A did not qualify for equity accounting because the holder may elect cash settlement of this warrant in the event of a change of control. As a result, we carry Warrant A as a liability at fair value in our consolidated balance sheets and the change in fair value of this warrant is recorded in our consolidated statements of operations. The net proceeds from the offering of $2.8 million, after deducting commissions and other cash offering expenses of $0.2 million were allocated to derivative warrant liability, in an amount equal to the $0.6 million estimated fair value of Warrant A as of September 13, 2021, with the remainder of the proceeds recorded in equity. We determined the exercise price of the Prefunded Warrant was nominal and, as such, considered the 230,786 shares initially underlying the 2021 Prefunded Warrant to be outstanding effective September 13, 2021, for the purposes of calculating basic EPS. We used the net proceeds from the September 2021 offering for general corporate purposes, which included funding capital expenditures and working capital and repaying indebtedness.

On March 30, 2020, we entered into an at market issuance (ATM) sales agreement with respect to an at-the-market offering program through B. Riley FBR, Inc, as sales agent. The issuances and sales of our common stock under the ATM sales agreement are made pursuant to our effective “shelf” registration statement on Form S-3. During 2021, we issued and sold 75,490 shares of common stock under an at market issuance sales agreement, at an average price of $8.00 per share. Proceeds from those 2021 sales of $0.5 million are recorded in equity, net of $0.1 million of stock issuance costs.

Under the terms of the securities purchase agreement related to the September 2021 offering, we are prohibited from entering into an agreement to effect any ATM issuance until September 13, 2023. Under the terms of the securities purchase agreement related to the October offerings, we are generally prohibited from entering into an agreement to effect an offering of our common stock or common stock equivalents until May 20, 2023, or a variable rate transaction, as defined in the agreement, until October 20, 2023.

Equity Incentive Plan

Our board of directors adopted our Amended and Restated 2014 Equity Incentive Plan (the 2014 Plan) after shareholders approved the plan, and amendments thereto. On July 14, 2022, shareholders approved an increase in the number of shares of common stock authorized for issuance under the 2014 Plan of 600,000 shares. The total shares of common stock now authorized for issuance under the 2014 Plan is 1,230,000 shares. Under the terms of the plan, we may grant stock options, shares of common stock and share-based awards to officers, directors, employees or consultants providing services on such terms as are determined by the board of directors. Our board of directors administers the plan, determines vesting schedules on plan awards and may accelerate the vesting schedules for award recipients. The stock options granted under the 2014 Plan have terms of up to 10 years and vesting periods of up to 4 years. The restricted stock units granted under the plan vest over periods of up to 5 years. As of December 31, 2022, awards for the purchase of 1,088,457 shares of common stock have been granted and remain outstanding (common stock options, common stock and restricted stock units) and 141,543 shares of common stock are reserved for future grants under the 2014 Plan.

Share-based compensation expenses related to employees and directors are included in selling, general and administrative expenses. Share-based compensation by type of award follows (in thousands).

	2022		2021
Restricted stock units	$	1,160	$	866
Stock options		101		140
Common stock		-		108
Compensation expense related to common stock awards issued under equity incentive plan	$	1,261	$	1,114

Information regarding common stock issued under the 2014 Plan, including shares issued upon vesting of restricted stock units follows. All shares of common stock issued in 2022 or 2021 were vested as of the date issued.

	2022				2021
	Shares Issued		Weighted Average Grant Date Fair Value Per Share		Shares Issued		Weighted Average Grant Date Fair Value Per Share
Directors		34,875	$	6.71		13,608	$	7.95
Employees		89,307		5.75		57,250		5.52
Consultant		13,516		6.47		-
		137,698				70,858

In the period from January1, 2023 to March 16, 2023, we issued 68,693 shares of common stock upon the vesting of restricted stock units.

Restricted Stock Units

We have outstanding (i) restricted stock units issued under the 2014 Plan (RSUs) to employees and directors and (ii) other restricted stock units issued to a service provider (SUs). Each RSU and SU represents a contingent right to receive one share of common stock. Summaries of nonvested and vested stock unit and activity follow.

	RSUs										SUs
	Number of Units			Unrecognized Compensation (in thousands)			Average Grant Date Fair Value per share		Weighted Average Expense Period (Years)		Number of Units		Unrecognized Compensation (in thousands)			Average Grant Date Fair Value per share		Weighted Average Expense Period (Years)
Nonvested at January 1, 2021		149,540		$	730		$	4.88		1.4		-	$	-		$	-	$	-
Granted		82,469			796			9.65		1.0		-		-			-		-
Forfeited		(291	)		(3	)		10.31		0.7		-		-			-		-
Vested with service		(105,115	)		-					-		-		-			-		-
Expensed		-			(865	)	NA			-		-		-			-		-
Nonvested at December 31, 2021		126,603			658			5.20		0.9		-		-			-		-
Granted		527,871			1,680			3.18		2.7		160,000		216			1.35		3.0
Impact of Modification:												-		-			-		-
Before modification		(17,050	)		(150	)		8.77		0.6		-		-			-		-
After modification		17,050			64			3.73		-		-		-			-		-
Forfeited		(11,744	)		(68	)		5.77		1.1		-		-			-		-
Vested with Service		(275,912	)		-					-		-		-			-		-
Expensed		-			(1,160	)	NA			-		-		(15	)	NA			-
Nonvested at December 31, 2022		366,818		$	1,024		$	2.79		2.8		160,000	$	201		$	1.26		2.7

	Number of RSUs
Vested at January 1, 2021		38,640
Vested with service		105,115
Issued at vesting		(57,250	)
Vested at December 31, 2021		86,505
Vested with service		275,912
Issued at vesting		(83,725	)
Issued at termination of service		(53,967	)
Vested at December 31, 2022		224,725

At December 31, 2022, unvested RSUs had an intrinsic value of $0.3 million. unvested SUs had an intrinsic value of $0.1 million, and vested RSUs had an intrinsic value of $0.2 million. As of December 31, 2022, the intrinsic value of all RSUs and SUs outstanding was $0.6 million, unrecognized compensation was $1.2 million and the remaining vesting period was 2.8 years. At December 31, 2022, issuance of 165,790 shares of common stock subject to the unvested RSUs and 224,725 shares of common stock subject to the vested RSUs, is deferred to the date the holder is no longer providing service to our company.

We issued 160,000 SUs to a service provider in 2022, which the service provider elected to purchase with a $0.2 million cash signing fee. The SUs vest in three annual installments ending in September 2025 and we are expensing the fair value of the SUs over three years. The service provider may also earn performance-based cash compensation beginning October 1, 2022, if certain performance criteria are met. The performance compensation will be paid quarterly in an amount of cash which may then be used to purchase, at the election of the service provider, a number of fully vested SUs equal to (a) the performance compensation, divided by (b) the volume weighted average closing price of our common stock over the 90 consecutive trading days ending on the last day of the applicable performance period. The aggregate number of SUs purchased by the service provider, including the initial 160,000 SUs issued in 2022 may not exceed 1,000,000.

In 2022, we modified RSUs held by resigning directors and an employee such that the awards vested on the date of their termination of service. Prior to the modification, the resigning directors and employee would have forfeited the unvested RSUs on the date service terminated. As a result of the modifications, we adjusted cumulative expense on the RSUs to equal the fair value of the awards on the modification dates in accordance with applicable accounting guidance, as indicated in the table above.

Options

As of December 31, 2022 and 2021, we had outstanding options for the purchase of up 55,424 and 64,396 shares of common stock. We granted no stock options in 2022 and 2021. Stock options for the purchase of up to 8,972 and 3,107 shares of common stock forfeited or expired in 2022 and 2021. As of December 31, 2022, outstanding stock options had an intrinsic value of zero, a weighted average exercise price of $19.42 per share, a weighted average remaining vesting period of 1.1 years and a weighted average contractual remaining term of 5.9 years. As of December 31, 2022, unrecognized stock option compensation cost was $70 thousand. As of December 31, 2022, exercisable options had an intrinsic value of zero.

Unrecognized Compensation

As of December 31, 2022, the total amount of unrecognized compensation for all outstanding common stock awards (options, RSUs and SUs was $1.3 million, and the remaining average expense period was 2.7 years (including unrecognized compensation on SUs of $0.2 million with a remaining average expense period of 2.7 years.)

Warrants

The 2022 Prefunded Warrant was exercised in its entirety in 2022 and we issued 325,000 shares of common stock upon the cash exercises. The 2021 Prefunded Warrant was cashless exercised in its entirety in 2021 and we issued 230,750 shares of common stock upon the cashless exercises. The initial $10.00 per share exercise price of Warrant A adjusted, pursuant to its original terms, to $2.72 per share in September 2022, and will be subject to adjustment again in September 2023, if 110% of the 5-day volume weighted average price of our common stock is less than the then-current exercise price.

Warrant activity, excluding activity related to prefunded warrants follows.

	2022							2021
	Shares Under Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Shares Under Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Outstanding at January 1		875,067		$	9.76		1.4		664,592		$	9.82		1.1
Issued		2,063,000			1.61		3.1		230,769		$	10.00		5.0
Impact of Warrant A exercise price adjustment:
Before adjustment		230,769			10.00		4.0
After adjustment		(230,769	)		2.72		4.0
Cash exercised									(17,794	)		9.60		0.8
Expired		(639,298	)		9.60		-		(2,500	)		52.50		-
Outstanding at December 31		2,298,769		$	1.76		2.9		875,067		$	9.76		1.4

The following table summarizes information related to exercisable and outstanding warrants as of December 31, 2022.

		Outstanding						Exercisable
Exercise Prices		Shares Under Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Shares Under Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
$	1.60		2,000,000	$	1.60		2.8		-	$	-		-
$	1.88		63,000		1.88		4.8		-		-		-
$	2.72		230,769		2.72		3.7		230,769		2.72		3.7
$	20.00		5,000		20.00		0.1		5,000		20.00		0.1
			2,298,769	$	1.76		2.9		235,769	$	3.09		3.6