Stockholders’ Equity and Convertible Preferred Stock

12 Months Ended

Dec. 31, 2023

Stockholders’ Equity and Convertible Preferred Stock [Abstract]

Stockholders’ Equity and Convertible Preferred Stock

Note 14. Stockholders’ Equity and Convertible Preferred Stock

Common Stock

On March 6, 2023, the Company cancelled 644,499 shares of common stock as a result of retirement of 644,499 shares of treasury stock.

On March 20, 2023, the Company cancelled 25,000 shares of common stock owned by an executive.

Treasury Stock

On January 21, 2022, the Company’s board of directors authorized a share buyback program (the “Share Buyback Program”), pursuant to which the Company authorized the Share Buyback Program in an amount of up to three million dollars. During the year ended December 31, 2023, the Company repurchased 236,630 shares at a cost of approximately $0.9 million or $3.97 per share through marketable securities account under the Share Buyback Program. During the year ended December 31, 2022, the Company repurchased 468,017 shares at a cost of approximately $3.1 million or $6.53 per share through marketable securities account under the Share Buyback Program. The Company records treasury stock using the cost method.

On March 6, 2023, the Company retired 644,499 shares of treasury stock with original cost of approximately $3.8 million.

Preferred Stock

Series D Convertible Preferred Stock

In connection with the acquisition of North South’s patent portfolio in September 2013, the Company issued 1,379,685 shares of its Series D Convertible Preferred Stock (“Series D Preferred Stock”) to the stockholders of North South. Each share of Series D Preferred Stock has a stated value of $0.0001 per share and is convertible into 10 over 1,373 of a share of Common Stock. Upon the liquidation, dissolution or winding up of the Company’s business, each holder of Series D Preferred Stock shall be entitled to receive, for each share of Series D Preferred Stock held, a preferential amount in cash equal to the greater of (i) the stated value or (ii) the amount the holder would receive as a holder of Common Stock on an “as converted” basis. Each holder of Series D Preferred Stock shall be entitled to vote on all matters submitted to its stockholders and shall be entitled to such number of votes equal to the number of shares of Common Stock such shares of Series D Preferred Stock are convertible into at such time, taking into account the beneficial ownership limitations set forth in the governing Certificate of Designation and the conversion limitations described below. The conversion ratio of the Series D Preferred Stock is subject to adjustment in the event of stock splits, stock dividends, combination of shares and similar recapitalization transactions.

As of December 31, 2023 and 2022, 5,000,000 Series D Preferred Stock was designated; 3,825 and 3,825 shares remained issued and outstanding.

Series D-1 Convertible Preferred Stock

The Company’s Series D-1 Convertible Preferred Stock (“Series D-1 Preferred Stock”) was established on November 22, 2013. Each share of Series D-1 Preferred Stock has a stated value of $0.0001 per share and is convertible into 10 over 1,373 of a share of Common Stock. Upon the liquidation, dissolution or winding up of the Company’s business, each holder of Series D-1 Preferred Stock shall be entitled to receive, for each share of Series D-1 Preferred Stock held, a preferential amount in cash equal to the greater of (i) the stated value or (ii) the amount the holder would receive as a holder of Common Stock on an “as converted” basis. Each holder of Series D-1 Preferred Stock shall be entitled to vote on all matters submitted to the Company’s stockholders and shall be entitled to such number of votes equal to the number of shares of Common Stock such shares of Series D-1 Preferred Stock are convertible into at such time, taking into account the beneficial ownership limitations set forth in the governing Certificate of Designation. The conversion ratio of the Series D-1 Preferred Stock is subject to adjustment in the event of stock splits, stock dividends, combination of shares and similar recapitalization transactions. The Company commenced an exchange with holders of Series D Convertible Preferred Stock pursuant to which the holders of the Company’s outstanding shares of Series D Preferred Stock acquired in the Merger could exchange such shares for shares of the Company’s Series D-1 Preferred Stock on a one-for-one basis.

As of December 31, 2023 and 2022, 5,000,000 Series D-1 Preferred Stock was designated; 834 and 834 shares remained issued and outstanding.

Warrants

A summary of warrant activity for years ended December 31, 2023 and 2022 is presented below:

	Warrants		Weighted Average Exercise Price		Total Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding as of December 31, 2021		341,268	$	31.68		-		3.87
Issued		103,528		21.25		-		4.15
Outstanding as of December 31, 2022		444,796	$	29.25		-		3.20
Outstanding as of December 31, 2023		444,796	$	29.25		-		2.20

Confirmation of Mutual Understanding - In March 2022, pursuant to a Confirmation of Mutual Understanding (the “Confirmation”), all parties to the Confirmation acknowledged and confirmed a scrivener’s error set forth in warrants to purchase shares of the Company’s common stock (the “Warrants”) dated March 10, 2020, April 15, 2020 and March 2, 2021. Pursuant to the Confirmation, all parties, which were involved in the original execution of the warrants, agreed that clause (v) of the definition of Fundamental Transaction in Section 3(d) of the Warrants, is as follows:

“the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the voting power of the Company’s outstanding equity securities, including with respect to the election of directors (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination)”. 

Restricted Stock Awards

June 27, 2023, pursuant to Soo Yu’s employment agreement and the Company’s 2022 Equity Incentive Plan, the Company executed a Grant Agreement, through which Soo Yu was granted 1,033,591 shares of the Company’s common stock. Upon issuance, the shares were fully vested and nonforfeitable with a total fair value of approximately $2.7 million. Pursuant to the Grant Agreement, the Company withheld 503,876 of the shares granted to satisfy Soo Yu’s tax obligation of approximately $1.3 million and recorded as income taxes withheld within the consolidated balance sheet. See Restricted Stock roll-forward below.

December 19, 2023, pursuant to Soo Yu’s employment agreement and the Company’s 2022 Equity Incentive Plan, the Company executed a Grant Agreement, through which Soo Yu was granted 1,287,129 shares of the Company’s common stock. Upon issuance, the shares were fully vested and nonforfeitable with a total fair value of approximately $2.6 million. Pursuant to the Grant Agreement, the Company withheld 657,079 of the shares granted to satisfy Soo Yu’s tax obligation of approximately $1.3 million and recorded as income taxes withheld within the consolidated balance sheet. See Restricted Stock roll-forward below.

December 19, 2023, pursuant to the Company’s 2022 Equity Incentive Plan, the Company executed a Grant Agreement, through which Joshua Shipley was granted 33,003 shares of the Company’s common stock. Upon issuance, the shares were fully vested and nonforfeitable with a total fair value of approximately $67,000. Pursuant to the Grant Agreement, the Company withheld 13,300 of the shares granted to satisfy Soo Yu’s tax obligation of approximately $27,000 and recorded as income taxes withheld within the consolidated balance sheet. See Restricted Stock roll-forward below.

During the year ended December 31, 2023, the Company also issued an aggregate of 136,309 shares of the Company’s common stock to members of the Company’s Board of Directors and an employee for services rendered.

During the year ended December 31, 2022, the Company issued an aggregate of 238,244 shares of the Company’s common stock to members of the Company’s Board of Directors and an employee for services rendered.

A summary of restricted stock awards activity for the years ended December 31, 2023 and 2022, is presented below: 

	Number of Restricted Stock Awards			Weighted Average Grant Day Fair Value
Nonvested at December 31, 2021		-		$	-
Granted		238,244			6.13
Vested		(230,176	)		6.14
Nonvested at December 31, 2022		8,068		$	5.90
Granted		1,315,777		$	2.27
Vested		(1,187,536	)		2.30
Nonvested at December 31, 2023		136,309		$	2.26

Stock-based compensation associated with the amortization of restricted stock awards expense was approximately $2.7 million and $1.4 million for the years ended December 31, 2023, and 2022, respectively. All stock compensation was recorded as a component of general and administrative expenses.

As of December 31, 2023, there is approximately $0.2 million unrecognized stock-based compensation expense related to restricted stock awards.

Stock Options

A summary of option activity under the Company’s stock option plan for year ended December 31, 2023 and 2022 is presented below:

	Number of Shares			Weighted Average Exercise Price		Total Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding as of December 31, 2021		28,203		$	548.35	$	-		8.2
Employee options granted		170,587			5.95		-		0.3
Employee options forfeited		(167,381	)		41.90		-		-
Employee options expired		(216	)		73.70		-		-
Outstanding as of December 31, 2022		31,193		$	302.97	$	-		7.9
Employee options granted		395,714			3.42		-		9.4
Employee options forfeited		(5,882	)		5.95		-		-
Employee options expired		(857	)	$	9,719.07		-		-
Outstanding as of December 31, 2023		420,168		$	5.80	$	-		9.3
Options vested and exercisable		84,929		$	15.16	$	-		8.8

Stock-based compensation associated with the amortization of stock option expense was approximately $0.2 million and $13,000 for the years ended December 31, 2023, and 2022, respectively. All stock compensation was recorded as a component of general and administrative expenses.

Estimated future stock-based compensation expense relating to unvested stock options is approximately $0.5 million.